EXHIBIT 4.28
WARRANT AGREEMENT (this "Agreement"), dated as of September 30, 2002, by
and between HOME DIRECTOR, INC., a Delaware corporation (the "Company"), and
XXXXXX SECURITIES, INCORPORATED.
W I T N E S S E T H
WHEREAS, pursuant to that certain Placement Agency Agreement,
dated April 10, 2002 (the "Agency Agreement"), the Company proposes to sell to
Xxxxxxx Xxxxx Ventures, Inc. (the "Agent") and/or its designees warrants
("Warrants") to purchase shares of common stock, par value $.001 per share, of
the Company ("Common Stock").
NOW, THEREFORE, in consideration of the premises, the payment
by the Agent to the Company of ONE DOLLAR, the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT. The Holders (as defined below) are hereby granted
the right to purchase, at any time from the date of the final closing (the
"Final Closing") of the offering under that certain Private Placement Memorandum
dated April 10, 2002 (the "Memorandum") until 5:30 p.m., New York time, on the
earlier of (a) the seventh anniversary of the Final Closing date and (b) the
fifth anniversary of the earlier of the closing date of (1) the initial public
offering of the Company's Common Stock occurring within such seven-year period
or (2) the Merger (as defined in the Memorandum) (the "Warrant Exercise Term"),
a number of shares of Common Stock equal to twenty percent (20%) of the gross
proceeds of the Units (as defined on the Agency Agreement) divided by $0.01 per
share at the initial exercise price (subject to adjustment as provided in
Section 8 hereof) of $0.01 per share of Common Stock, subject to the terms and
conditions of this Agreement.
2. WARRANT CERTIFICATES. The Warrant certificate(s) (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in EXHIBIT A, attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1. METHOD OF EXERCISE. The Warrants are initially
exercisable at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) per share of Common Stock set forth in Section 5 hereof
payable by certified or official bank check in New York Clearing House funds,
subject to adjustment as provided in Section 8 hereof. Upon surrender of a
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
shares of Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") at the Company's principal offices, currently at 0000 Xxxxx Xxxxxx
Xxxx., Xxx Xxxx, Xxxxxxxxxx 00000, the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). Warrants may be exercised to purchase all
or part of the shares of Common Stock represented thereby. In the case of
purchase of less than all the shares of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock.
3.2. EXERCISE BY SURRENDER OF WARRANT. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrant shall have the right at any
time and from time to time, provided that the Common Stock (or any equity
security into which the Common Stock may be exchanged or converted) is
registered under the Securities Exchange Act of 1934 (the "Exchange Act"), to
exercise the Warrants in full or in part by surrendering the Warrant Certificate
in the manner specified in Section 3.1 in exchange for the number of shares of
Common Stock equal to the product of (x) the number of shares as to which the
Warrants are being exercised multiplied by (y) a fraction, the numerator of
which is the Market Price (as defined in Section 8.1(vi) hereof) of the Common
Stock less the Exercise Price and the denominator of which is such Market Price.
Solely for the purposes of this Section 3.2, Market Price
shall be calculated either (i) on the date on which the annexed Form of Election
is deemed to have been sent to the Company pursuant to Section 13 hereof
("Notice Date") or (ii) as the average of the Market Price for each of the five
(5) trading days preceding the Notice Date, whichever of (i) or (ii) is greater.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the
Warrants, certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants, shall be issued forthwith (and in
any event such issuance shall be made within five business days) without charge
to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Section 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax which may be payable in respect to
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or people
requesting the issuance thereof shall have paid to the Company the amount of
such tax or it shall be established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock (and/or other securities, property or rights issuable
upon exercise of the Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
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5. EXERCISE PRICE.
5.1. INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 8 hereof, the Warrants shall be exercisable to purchase
Common Stock at a price of $0.10 per share. The adjusted exercise price shall be
the price which shall result from time to time from any and all adjustments of
the initial exercise price in accordance with the provisions of Section 8
hereof.
5.2. EXERCISE PRICE. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
6. REGISTRATION RIGHTS.
6.1. REGISTRATION UNDER THE SECURITIES ACT OF 1933. Neither
the Warrants nor the Warrant Shares (collectively, the "Warrant Securities")
have been registered under the Securities Act of 1933 (the "Act") for public
resale. The Warrants, and any securities issuable upon exercise of the Warrants
shall bear the following legends:
The Securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and may not be offered,
sold, pledged or otherwise transferred except pursuant to (i) an effective
registration statement under the Act, or (ii) to the extent applicable, Rule 144
under the Act (or any similar rule under the Act relating to the disposition of
securities), provided that the issuer of this certificate is provided with an
opinion of counsel reasonably satisfactory to the issuer, that an exemption from
registration under such Act is available.
The transfer or exchange of the securities represented by this
certificate is restricted in accordance with the warrant agreement referred to
herein.
6.2. PIGGYBACK REGISTRATION. If, at any time commencing after
the date hereof until the expiration of the Warrant Exercise Term, the Company
(or any successor company into which the Company may be merged) proposes to
register any of its securities under the Act on a registration statement that
may be used for the registration of the Warrant Securities (other than in
connection with a merger, pursuant to Form X-0, X-0 or comparable registration
statement, in connection with a registration requested pursuant to Section 6.3
hereof or in connection with an exchange offer or an offering of securities
solely to the Company's existing stockholders) it will give written notice by
registered mail, at least thirty (30) business days prior to the filing of each
such registration statement, to the Agent and to all other Holders of the
Warrant Securities of its intention to do so. If the Agent or other Holders of
the Warrant Securities notify the Company within twenty (20) days after receipt
of any such notice of its or their desire to include any Warrant Securities in
such proposed registration statement, the Company shall afford the Agent and
such Holders of the Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement.
Notwithstanding the provisions of this Section 6.2, (A) the
Company shall have the right any time after it shall have given written notice
pursuant to this Section 6.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect to postpone or
not to file any such proposed registration statement, or to withdraw the same
after filing but prior to the effective date thereof and (B) if the underwriter
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or underwriters, if any, of any such proposed public offering shall be of the
reasonable opinion that the total amount or kind of securities held by the
holders of Warrant Securities and any other persons or entities entitled to be
included in such Public Offering would adversely affect the success of such
public offering, then the amount of securities to be offered for the accounts of
holders of Warrant Securities shall be reduced pro rata to the extent necessary
to reduce the total amount of securities to be included in such public offering
to the amount reasonably recommended by the underwriter or underwriters thereof,
whereupon the Company shall only be obligated to register such limited portion
(which may be none) of the Warrant Securities with respect to which such holder
has provided notice pursuant to this Section 6.2. In no event shall the Company
be required pursuant to this Section 6.2 to reduce the amount of securities to
be registered by it.
6.3. DEMAND REGISTRATION.
(a) So long as the Company (or any successor company into
which the Company may be merged) shall have any of its securities registered
under the Act or the Exchange Act, at any time commencing after the date hereof
until expiration of the Warrant Exercise Term, the Holders of the Warrant
Securities representing a "Majority" (as hereinafter defined) of such Warrant
Securities (assuming the exercise of all of the then outstanding Warrants) shall
have the right (which right is in addition to the registration rights under
Section 6.2 hereof), exercisable by written notice to the Company (or any
successor company into which the Company may be merged), to have the Company (or
any successor company into which the Company may be merged) prepare and file
with the Securities and Exchange Commission (the "Commission"), on two (2)
occasions, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and the counsel for the Agent and Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Warrant Securities for no less than one hundred twenty (120) days by
such Holder and any other Holders of the Warrant Securities who notify the
Company within ten (10) days after receiving notice from the Company of such
request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 6.3 by any Holder or Holders to all
other registered Holders of the Warrant Securities within fifteen (15) days from
the date of the receipt of any such registration request; PROVIDED, that the
Company shall have the right to delay the effectiveness of such registration
request (A) for such reasonable period of time until the Company receives or
prepares financial statements for the fiscal period most recently ended prior to
such written request, if necessary to avoid the use of stale financial
statements, or (B) if the Company would be required to divulge in such
registration statement the existence of any fact relating to a material business
situation, transaction or negotiation not otherwise required to be disclosed or
(C) if the Board of Directors of the Company shall determine in good faith that
the registration to be effected would not be in the best interest of the
Company, in which case the Company shall have the right to delay such filing for
a period of no longer than one hundred (120) days.
(c) All expenses (other than underwriting discounts and
commissions) incurred in connection with registration, filings or qualification
pursuant to the first registration request made pursuant to the subsection (a)
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of this Section 6.3, including, without limitation, all registration, listing,
filing and qualification fees, printers and accounting fees and the fees and
disbursements of counsel for the Holders shall be borne by the Company. Upon a
second registration request pursuant to subsection (a) of this Section 6.3, the
Holders requesting registration shall bear such costs on a pro-rata basis with
respect to the Warrant Securities in respect of which they are requesting
registration.
(d) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 6.3(b) hereof pursuant to
the written notice specified in Section 6.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company agrees that upon the written
notice of election of a Majority of the Holders of the Warrants and/or Warrant
Securities it shall repurchase (i) any and all Warrant Securities at the higher
of the Market Price as defined in Section 8.1(vi) per share of Common Stock on
(x) the date of the notice sent pursuant to Section 6.3(a) or (y) the expiration
of the one-hundred-twenty-day (120-day) period specified in Section 6.3(b) and
(ii) any and all Warrants at such Market Price less the exercise price of such
Warrant. Such repurchase shall be in immediately available funds and shall close
within two (2) days after the later of (i) the expiration of the period
specified in Section 6.3(b) or (ii) the delivery of the written notice of
election specified in this Section 6.3(d).
6.4. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Sections 6.2 or 6.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement as soon as practicable and shall use its best efforts to
have any registration statement declared effective at the earliest possible
time, and shall furnish each Holder desiring to sell Warrant Securities such
number of prospectuses as shall reasonably be requested.
(b) Except as provided in Section 6.3(c) above, the Company
shall pay all costs (excluding fees and expenses of Holder(s)' counsel and any
underwriting or selling commissions or other charges of any broker-dealer acting
on behalf of Holder(s)), fees and expenses in connection with all registration
statements filed pursuant to Section 6.2 and 6.3(a) hereof including, without
limitation, the Company's legal and accounting fees, printing expenses, blue sky
fees and expenses. The Holders(s) will pay all costs, fees and expenses in
connection with any registration statement filed pursuant to the second sentence
of Section 6.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included in the
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s) in writing,
provided that the Company shall not be obligated to qualify to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process where it is not so subject or
would subject the Company to any tax in any jurisdiction where it is not then so
subject.
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(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify the Agent contained in
Section 7 of the Agency Agreement.
(e) The Holder(s) of the Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such a registration statement to the same
extent and with the same effect as the provision contained in Section 7 of the
Placement Agency Agreement pursuant to which the Agent has agreed to indemnify
the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall prepare and file with the SEC such
amendments and post-effective amendments to the registration statement as may be
necessary to keep the Registration effective until all such Warrant Securities
are sold; cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof as set forth in such registration
statement or supplement to the prospectus
(h) The Company shall furnish to each Holder participating in
an offering including Warrant Securities pursuant to Sections 6.2 or 6.3 hereof,
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (PROVIDED, HOWEVER, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement and not the effective date), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
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and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(i) The Company shall, as soon as practicable after the
effective date of a registration statement relating to any Warrant Securities
pursuant to Section 6.2 or 6.3 hereof, and in any event within fifteen (15)
months thereafter, use its reasonable efforts to make "generally available to
its security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least twelve (12) consecutive months beginning after
the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder
participating in an offering including any Warrant Securities pursuant to
Sections 6.2 or 6.3 hereof who so requests and to the managing underwriter
copies of all correspondence between the Commission and the Company, its counsel
or auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the registration statement, and shall permit each
underwriter to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration statement
as it deems reasonably necessary to comply with applicable securities laws or
rules of the National Association of Securities Dealers, Inc. ("NASD"). Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such underwriter shall reasonably request as it deems
necessary to comply with applicable securities laws and NASD rules.
(k) With respect to a registration pursuant to Section 6.3
hereof, the Company shall enter into an underwriting agreement with the managing
underwriter selected for such underwriting by Holders holding a Majority of the
Warrant Securities requested to be included in such underwriting, provided that
such managing underwriter(s) shall be satisfactory to the Company and each
Holder and such agreement shall be satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Warrant Securities and may, at their option,
require that any or all the representations, warranties and covenants of the
Company to or for the benefit of such underwriters shall also be made to and for
the benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(l) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean in excess
of fifty percent (50%) of the outstanding Warrants or Warrant Securities that
(i) are not held by the Company, an affiliate (excluding the Agent and any
affiliate of the Agent), officer, creditor, employee or agent thereof or any of
their respective affiliates, members of their family, persons acting as nominees
or in conjunction therewith or (ii) have not been resold to the public pursuant
to a registration statement filed with the Commission under the Act.
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7. INTENTIONALLY DELETED.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1. COMPUTATION OF ADJUSTED EXERCISE PRICE. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of its Stock (as defined in Section 8.5), other
than the issuance or sales referred to in Section 8.6 hereof, including shares
held in the Company's treasury and shares of Stock issued upon the exercise of
any options, rights or warrants, to subscribe for shares of Stock issued upon
the direct or indirect conversion or exchange of securities for shares of Stock,
for a consideration per share less than the Exercise Price in effect immediately
prior to the issuance or sale of such shares or the "Market Price," as defined
in Section 8.1(vi), hereof per share of Stock on the date immediately prior to
the issuance or sale of such shares, or without consideration, then forthwith
upon such issuance or sale, the Exercise Price shall (until another such
issuance or sale) be reduced to the price (calculated to the nearest full cent)
equal to the quotient derived by dividing (A) an amount equal to the sum of (X)
the product of (a) the lower of (i) the Exercise Price in effect immediately
prior to such issuance or sale and (ii) the Market Price per share of Stock on
the date immediately prior to the issuance or sale of such shares, in either
event, reduced, but not to a number which is below .001, by the positive
difference, if any, between the (u) Market Price per share of Stock on the date
immediately prior to the issuance or sale and (v) the amount per share received
in connection with such issuance or sale, multiplied by (b) the total number of
shares of Stock outstanding immediately prior to such issuance or sale, plus (Y)
the aggregate of the amount of all consideration, if any, received by the
Company upon such issuance or sale, by (B) the total number of shares of Stock
outstanding immediately after such issuance or sale; PROVIDED, HOWEVER, that in
no event shall the Exercise Price be adjusted pursuant to this computation to an
amount in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Stock,
as provided by Section 8.3 hereof.
For the purposes of this Section 8 the term Exercise Price
shall mean the Exercise Price per share of Common Stock set forth in Section 5
hereof, as adjusted from time to time pursuant to the provisions of this Section
8.
For purposes of any computation to be made in accordance with
this Section 8.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration, shall be deemed to be the amount of cash received by the Company
for such shares (or, if shares of Stock are offered by the Company for
subscription, the subscription price, or, if either of such securities shall be
sold to underwriters or dealers for public offering without a subscription
price, the public offering price, before deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or other persons or entities performing similar
services), or any expenses incurred in connection therewith and less any amounts
payable to security holders or any affiliate thereof, including, without
limitation, any employment agreement, royalty, consulting agreement, covenant
not to compete, earnout or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written; all such amounts shall be
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valued at the aggregate amount payable thereunder whether such payments are
absolute or contingent and irrespective of the period or uncertainty of payment,
the rate of interest, if any, or the contingent nature thereof.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Stock
for a consideration part or all of which shall be other than cash, the amount of
the consideration therefore other than cash shall be deemed to be the value of
such consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Stock issuable by way of dividend or other
distribution on any capital stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the Company other
than shares of Stock into securities including shares of Stock shall be deemed
to involve the issuance of such shares of Stock for consideration other than
cash immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Stock shall be determined as
provided in subsection (ii) of this Section 8.1.
(v) The number of shares of Stock at any one time outstanding
shall include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of then
outstanding options, rights, warrants and upon the conversion or exchange of
then outstanding convertible or exchangeable securities.
(vi) As used herein, the phrase "Market Price" at any date
shall be deemed to be the last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices for
the last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Stock is listed or admitted to
trading, or, if the Stock is not listed or admitted to trading on any national
securities exchange, the average closing bid price as furnished by the NASD
through NASDAQ or similar organization if NASDAQ is no longer reporting such
information, or if the Stock is not quoted on NASDAQ, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it.
8.2. OPTIONS, RIGHTS, WARRANTS AND CONVERTIBLE AND
EXCHANGEABLE SECURITIES.
In case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Stock, or issue any
securities convertible into or exchangeable for shares of Stock, for a
consideration per share less than the Exercise Price in effect or the Market
Price immediately prior to the issuance of such options, rights, warrants or
such convertible or exchangeable securities, or without consideration, the
Exercise Price in effect immediately prior to the issuance of such options,
rights, warrants or such convertible or exchangeable securities, as the case may
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be, shall be reduced to a price determined by making a computation in accordance
with the provisions of Section 8.1 hereof; PROVIDED, that:
(a) The aggregate maximum number of shares of Stock, as the
case may be, issuable under such options, rights or warrants shall be deemed to
be issued and outstanding at the time such options, rights or warrants were
issued, for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the Warrants), if
any, received by the Company for such options, rights or warrants.
(b) The aggregate maximum number of shares of Stock issuable
upon conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined in
the same manner as consideration received on the issue or sale of shares of
Stock in accordance with the terms of the Warrants) received by the Company for
such securities, plus the minimum consideration, if any, receivable by the
Company upon the conversion or exchange thereof.
(c) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (a) of
this Section 8.2, or in the price per share at which the securities referred to
in subsection (b) of this Section 8.2 are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case may
be, shall be deemed to have expired or terminated on the date when such price
change became effective in respect to shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
8.3. SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding shares of Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.4. ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 8, the number
of securities issuable upon the exercise of each Warrant shall be adjusted to
the nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Securities
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.5. DEFINITION OF STOCK. For the purpose of this Agreement,
the term "Stock" shall mean (i) the class of stock designated as Common Stock,
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
in any Certificate of Designations of the Company as may be amended as of the
date hereof, or any other class of stock or equity security or (ii) any other
class of stock or equity security resulting from successive changes or
reclassifications of such Stock consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In the event
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that the Company shall after the date hereof issue securities with greater or
superior voting rights than the shares of Stock outstanding as of the date
hereof, the Holders, at their option, may receive upon exercise of any Warrants
either shares of Stock or a like number of such securities with greater or
superior voting rights.
8.6. MERGER OR CONSOLIDATION. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares of Stock of
the Company for which such warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 8. The above provision of this Subsection shall
similarly apply to successive consolidations or mergers.
8.7. NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price shall be made:
(a) Upon issuance or sale of the Warrants or the shares of
Stock issuable upon the exercise of the Warrants.
(b) Upon conversion of Preferred Stock or other options,
warrants and convertible securities outstanding as of the date hereof into
shares of Common Stock.
(c) Upon issuance of options, and Common Stock granted
thereunder, granted to employees of the Company issued under one or more stock
options plans that have an exercise price equal to the fair market value of the
Common Stock as determined in good faith by the Board of Directors.
(d) Upon issuance of shares of Common Stock as a result of the
antidilution rights attributable to the Series B or Series C Convertible
Preferred Stock.
(e) If the amount of said adjustment shall be less than two
cents ($0.02) per security issuable upon exercise of the Warrants, PROVIDED,
HOWEVER, that in such case any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least two cents ($0.02) per security
issuable upon exercise of the Warrants.
8.8. DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Stock) or
otherwise distribute to its stockholders any assets, properties, rights,
evidence of indebtedness, securities (other than shares of Stock), whether
issued by the Company or by another, or any other thing of value, the Holders of
the unexercised Warrants shall thereafter be entitled, in addition to the shares
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of Stock or other securities and property receivable upon the exercise thereof,
to receive, upon the exercise of such Warrants, the same property, assets,
rights, evidences of indebtedness, securities or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 8.8.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal office of the Company, for a new
Warrant Certificate of like form, tenor and date representing in the aggregate
the right to purchase the same number of securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like form and tenor in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue
script or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number or shares of Common Stock
11. RESERVATION AND LISTING OF SECURITIES. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefore,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder. As long as the Warrants shall be
outstanding and the Company shall have a class of its securities registered
under the Act or the Exchange Act, the Company shall use its best efforts to
cause all shares of Stock issuable upon the exercise of the Warrants to be
listed (subject to official notice of issuance) on all security exchanges on
which the Common Stock issued to the public in connection herewith may then be
listed and/or quoted.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this
Agreement shall be constructed as conferring upon the Holders the right to vote
or to consent or to receive notice to stockholders in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
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(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option right or warrant to subscribe therefore; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to the date fixed
as a record date for the dividend or the date of closing the transfer books for
the determination of the issuance of any convertible or exchangeable securities
or subscription rights, options or warrants or for the determination of the
persons or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation winding up or sale.
13. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company;
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Agent and the Holders, with a copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(c) If to the Agent, to:
Xxxxxxx Xxxxx Ventures, Incorporated
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attn: Xxxxxxx X. Xxxxxxxxx, President
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or to such other address as the Agent may designate by notice to the Company and
the Holders, with a copy to:
Xxxxxxxxxxx & Xxxxxxxx, LLP
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Agent may
from time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Agent) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Agent may deem necessary or desirable and which the Company and the
Agent deem shall not adversely affect the interests of the Holders of Warrant
Certificates. Other amendments to this Agreement may be made only with the
written consent of the Holders of the Majority of the Warrant Securities.
15. SUCCESSORS. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and permitted assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close
of business on the seventh anniversary of the Final Closing. Notwithstanding the
foregoing, the indemnification provisions of Section 6 shall survive such
termination until the close of business on the tenth anniversary of the date
hereof.
17. GOVERNING LAW: SUBMISSION TO JURISDICTION. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing conflicts of laws.
The Company, the Agent and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York, and irrevocably submits to such jurisdiction, which jurisdiction shall
be exclusive. The Company, the Agent and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Agent and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address as set
forth in Section 13 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Agent and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefore.
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18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including
the Placement Agency Agreement to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be
held to be invalid and unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed, as a part of this Agreement and shall be given no substantive
effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person, entity or corporation other than the
Company and the Agent and any other registered Holders(s) of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and the Agent and any other Holder(s) of the Warrant
Certificates or Warrant Securities.
22. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterpart shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written.
HOME DIRECTOR, INC.
By:
-------------------------------
Name: Xxxxx Xxxxx
Title: Director of Finance and
Corporate Secretary
XXXXXX SECURITIES,
INCORPORATED
By:
-------------------------------
Name:
Title:
16
EXHIBIT A
WARRANT CERTIFICATE
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), PROVIDED THAT THE
ISSUER OF THIS CERTIFICATE IS PROVIDED WITH AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. ___ _______Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Xxxxxx Securities, Inc. (the
"Agent"), or its registered assigns, is the registered holder of 1,883,200
Warrants to purchase initially, at any time after the date of the final closing
(the "Final Closing") of the offering under that certain Private Placement
Memorandum dated April 10, 2002 (the "Memorandum") until 5:30 p.m. New York time
on date (the "Expiration Date") that is the earlier of (a) the seventh
anniversary of the Final Closing date and (b) the fifth anniversary of the
earlier of the closing date of (1) the initial public offering of the Common
Stock (as defined below) of Home Director, Inc. (the "Company") occurring within
such seven-year period or (2) the Merger (as defined in the Memorandum) (the
"Warrant Exercise Term"), up to 1,883,200 fully paid and non-assessable shares
of common stock, par value $0.001 per share ("Common Stock") of the Company, at
the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $0.10 upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions and adjustments set forth herein and in that certain Warrant
Agreement dated as of September 30, 2002 between the Agent and the Company (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company or such other method as is set forth in the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
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The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and to which reference is hereby made for a description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Company and the holders (the words "holders" or "holder" meaning the
registered holder or registered holders) of the Warrants.
The Warrant Agreement provides that, upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable upon their exercise may, subject to certain conditions, be
adjusted. In such event, the Company will, at the request of the holder, issue a
new Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter or otherwise impair the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate and the executed form of assignment attached hereto at an office or
agency of the Company, a new Warrant Certificate or Warrant Certificates of like
form and tenor and evidencing in the aggregate a like number of Warrants shall
be issued to the transferee(s) in exchange for this Warrant Certificate, subject
to the limitations provided herein and in the Warrant Agreement, without any
charge except for any tax or other governmental charge imposed in connection
with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of September 30, 2002
HOME DIRECTOR, INC.
[SEAL] By:
---------------------------------
Name: Xxxxx Xxxxx
Attest: Title: Director of Finance and
Corporate Secretary
--------------------------------------
19
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ shares of
Common Stock.
In accordance with the terms of Section 3.2 of the Warrant Agreement
dated as of May __, 2002 between HOME DIRECTOR, INC. and Xxxxxxx Xxxxx Ventures,
Incorporated, the undersigned requests that a certificate for such securities be
registered in the name of __________________________ whose address is
___________________________ and that such Certificate be delivered to
_____________________________ whose address is ____________________________.
Dated:
Signature:
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
(Insert Social Security or Other Identifying
Number of Holder)
20
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________________________ hereby sells, assigns
and transfers unto____________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________
Attorney to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature:
----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
(Insert Social Security or Other Identifying
Number of Holder)
21
