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NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
LAWS OF ANY STATE. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR
SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
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SHARES ISSUABLE UPON EXERCISE: 1,000,000 GRANT DATE: OCTOBER __, 1999
WARRANT NO. ____
WARRANT TO PURCHASE COMMON STOCK
OF
THE MANAGEMENT NETWORK GROUP, INC.
THIS CERTIFIES THAT, for good and valuable consideration,
receipt of which is hereby acknowledged, Xxxxxxxx Communications, Inc.
("Holder"), or its registered assigns, is entitled to subscribe for and purchase
1,000,000 shares of common stock, par value $.0001 per share (the "Shares") of
THE MANAGEMENT NETWORK GROUP, INC., a Delaware corporation (the "Company"), at a
price per share of $1.00, as adjusted from time to time pursuant to the terms
specified herein ("Warrant Price"), subject to the provisions and upon the
terms, conditions and adjustments hereinafter set forth.
THE HOLDER ACKNOWLEDGES THAT THE COMPANY IS CONTEMPLATING A 1-FOR-2
REVERSE SPLIT OF ITS COMMON STOCK TO BE EFFECTED ON OR AROUND THE PARTIES
EXECUTION OF THIS WARRANT. HOLDER FURTHER ACKNOWLEDGES AND AGREES THAT
SUBSEQUENT TO THIS REVERSE SPLIT, REGARDLESS OF WHETHER SUCH REVERSE SPLIT IS
EFFECTED PRIOR TO HOLDER'S ACCEPTANCE HEREOF, THIS WARRANT WILL ENTITLE HOLDER
TO SUBSCRIBE FOR AND PURCHASE 500,000 SHARES AT A WARRANT PRICE OF $2.00 PER
SHARE, SUBJECT TO THE PROVISIONS AND UPON THE TERMS, CONDITIONS AND ADJUSTMENTS
HEREINAFTER SET FORTH.
1. EXERCISE OF WARRANT.
1.1 EXERCISE PERIOD. Holder may exercise this Warrant, in
whole or in part, at any time and from time to time (i) on or after November
____, 1999 [30 days after the Grant Date], and (ii) before the fifth anniversary
date of the Grant Date.
1.2 METHOD OF EXERCISE. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Holder shall also deliver
to the Company a check for the aggregate Warrant Price for the Shares being
purchased.
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1.3 NET EXERCISE. In lieu of exercising this Warrant pursuant
to Section 1.2 above, the Holder may elect to receive, without the payment by
the Holder of any additional consideration, Shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder hereof a number of Shares
computed using the following formula:
X = Y*(A-B) / A
Where: X = The number of Shares to be issued to the Holder
pursuant to this net exercise.
Y = The number of Shares in respect of which the net
issue election is made.
A = The fair market value (as determined below) of one
Share.
B = The Warrant Price (as adjusted to the date of
delivery of the Holder notice of election).
No fractional shares arising out of the above formula for determining the number
of shares issuable in such exchange shall be issued, and the Company shall in
lieu thereof make payment to Holder of cash in the amount of such fraction
multiplied by the fair market value of a one Share on the date of the exchange.
Any tax liability related to such transaction shall be paid by Holder. For the
purposes of this Section 1.3, the "fair market value" of any number of Shares
shall be calculated on the basis of (a) if the Company's common stock is then
traded on a securities exchange, the average of the closing prices of the common
stock on such exchange over the 5-day period ending three (3) days prior to the
date of exercise, (b) if the common stock is then actively traded
over-the-counter, the average of the closing bid or sale prices (whichever is
applicable) of the common stock over the 5-day period ending three (3) days
prior to the date of exercise, and (c) if there is no active public market for
the common stock, the fair market value thereof as determined in good faith upon
agreement by the parties, but if they cannot so agree, then by an independent
appraiser to be mutually agreed upon by the parties. The parties shall share
equally all costs associated with an appraisal for Holder's first net issuance
election requiring an independent appraiser. In the event any net exercise
elections thereafter require an independent appraiser, all costs associated
therewith shall be paid solely by the Holder
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after
Holder exercises this Warrant, the Company shall deliver to Holder certificates
for the Shares acquired and, if this Warrant has not been fully exercised and
has not expired, a new Warrant representing the Shares not so acquired.
2. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the
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issue thereof. During the period within which the rights represented by the
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of Shares to provide for the
exercise of the rights represented by this Warrant.
3. ADJUSTMENT TO THE SHARES AND WARRANT PRICE. The number of
Shares purchasable upon the exercise of this Warrant and the Warrant Price are
subject to adjustment from time to time as provided in this Section 3.
3.1 SUBDIVISION OR COMBINATION OF SHARES. If the Company shall
at any time subdivide its outstanding Shares into a greater number of Shares
(including a stock split effected as a stock dividend) or combine its
outstanding Shares into a lesser number of Shares, the number of Shares issuable
upon exercise of this Warrant shall be adjusted to such number as is obtained by
multiplying the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or combination by a fraction, the
numerator of which is the aggregate number of Shares outstanding immediately
after giving effect to such subdivision or combination and the denominator of
which is the aggregate number of Shares outstanding immediately prior to such
subdivision or combination, and the Warrant Price shall be correspondingly
adjusted to such amount as shall, when multiplied by the number of Shares
issuable upon full exercise of this Warrant (as increased or decreased to
reflect such subdivision or combination of outstanding Shares, as the case may
be), equal the product of the Warrant Price in effect immediately prior to such
subdivision or combination multiplied by the number of Shares issuable upon
exercise of this Warrant immediately prior to such subdivision or combination.
3.2 EFFECT OF SALE, MERGER OR CONSOLIDATION. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of all
or substantially all of the Company's assets to another corporation shall be
effected after the date hereof in such a way that holders of Shares shall be
entitled to receive stock, securities or assets with respect to or in exchange
for their Shares, then, as a pre-condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the Holder shall thereafter have the right to purchase and
receive, upon the basis and the terms and conditions specified in this Warrant
and in lieu of the Shares immediately theretofore purchasable and receivable
upon the exercise of this Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding Shares equal to the number of Shares immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the Holder so that the provisions of this Warrant (including,
without limitation, provisions for adjustments of the Warrant Price and of the
number of Shares issuable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be possible, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or sale unless prior
to or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume, by written instrument executed
and delivered to the Holder at its last address
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appearing on the books of the Company, the obligation to deliver to the Holder
such shares of stock, securities or assets as, in accordance with the foregoing
sentence, the Holder may be entitled to purchase.
3.3 NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
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 hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of Holder against
impairment.
4. NOTICE OF ADJUSTMENTS. Whenever the number of Shares subject
to this Warrant and the Warrant Price shall be adjusted pursuant to the
provisions hereof, (a) the Company shall promptly notify Holder of such
adjustment, and (b) the Company shall within sixty (60) days of such adjustment
deliver a certificate to the registered Holder hereof setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the number
of Shares and Warrant Price after giving effect to such adjustment. For purposes
of this Section 4, the Company's public filings with the Securities and Exchange
Commission shall be deemed proper notice under clause (a) above.
5. FRACTIONAL SHARES. No fractional shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
6. COMPLIANCE WITH SECURITIES ACTS. Holder, by acceptance hereof,
agrees that this Warrant and the Shares to be issued upon exercise hereof are
being acquired for investment and that Holder will not offer, sell or otherwise
dispose of this Warrant or any Shares to be issued upon exercise hereof except
as permitted herein and under circumstances which will not result in a violation
of the Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state. The Company may issue stop-transfer instructions to its transfer
agent in connection with the foregoing restriction. This Warrant and all Shares
issued upon exercise of this Warrant (unless registered under the Act) shall be
stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE LAWS OF ANY STATE. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
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7. RESTRICTIONS ON TRANSFER OF WARRANT. This Warrant and the
Holder's rights hereunder may not be transferred, assigned or subjected to a
pledge or security interest, except that the Holder may transfer this Warrant,
in whole, to an entity controlled by or under common control with the Holder by
surrender of this Warrant with a properly executed Assignment (in the form of
Appendix 2) at the principal office of the Company. An entity controlled by or
under common control with Holder shall be determined in accordance with Internal
Revenue Code Section 1563 except that 51% shall be substituted for the 80%
requirement thereunder. If the Company determines that the proposed assignment
is permitted pursuant to the provisions hereof, the Company shall register the
assignment of this Warrant in accordance with the information contained in the
executed Assignment and shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such Assignment and this Warrant shall
promptly be canceled. Conditions to the transfer of this Warrant shall be that
(i) Holder deliver to the Company an opinion of counsel (which may be in-house
counsel to the Holder), reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed transfer will not be in
violation of the Act or of any applicable state law, and (ii) the proposed
transferee deliver to the Company its written agreement to accept and be bound
by all of the terms and conditions of this Warrant.
8. ACCESS TO INFORMATION. The Holder acknowledges that it has had
access to all material information concerning the Company which it has
requested. The Holder also acknowledges that it has had the opportunity to, and
has to its satisfaction, questioned the officers of the Company with respect to
such Holder's investment hereunder.
9. REPRESENTATIONS AND WARRANTIES OF HOLDER. The Holder
represents and warrants to the Company that it understands that the Warrant and
the Shares are speculative investments, that it is aware of the Company's
business affairs and financial condition, and that it has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Warrant. The Holder is acquiring the Warrant and any Shares issued
upon exercise thereof for investment for its own account only and not with a
view to, or for resale in connection with, any "distribution" thereof within the
meaning of the Act or applicable state securities laws. The Holder further
represents that it understands that the Warrant and Shares have not been
registered under the Act or applicable state securities laws by reason of
specific exemptions therefrom, which exemptions depend upon, among other things,
the bona fide nature of Holder's investment intent as expressed herein. The
Holder represents that the Warrant and any Shares purchased upon exercise
thereof must be held indefinitely unless such securities are subsequently
registered under the Act and all applicable state securities laws, or an
exemption from such registration is available.
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10. REGISTRATION RIGHTS.
10.1 DEMAND REGISTRATION. If the Company shall receive from
the Holder a written request that the Company effect a registration with respect
to any of the Shares held by the Holder, the Company shall as soon as
practicable, but in any event within ninety (90) days after receipt of the
Holder's request, use its best efforts to register (including, without
limitation, the execution of an undertaking to file post-effective amendments
and any other governmental requirements) all Shares which the Holder requests to
be registered; provided, that the Company shall not be obligated to file a
registration statement pursuant to this Section 10.1:
(1) if the number of Shares requested to be registered
shall be less than 51% of the Shares held by the Holder; or
(2) until twelve (12) months after the effective date
of the Company's initial registered offering of Shares to the general
public; or
(3) after the Company has effected one such
registration pursuant to this Section 10.1 with respect to the full
number of shares requested by Holder, and such registration has been
declared or ordered effective.
10.2 UNDERWRITING. In the event Holder intends to offer for
sale the Shares pursuant to Section 10.1, such offering shall be firmly
underwritten by an underwriter approved by the Company in its sole discretion.
The Holder shall negotiate and enter into an underwriting agreement in customary
form with the Company and the underwriter selected.
10.3 DELAYS AND SUSPENSIONS. Notwithstanding the foregoing,
the Company may delay filing a registration statement, and may withhold efforts
to cause the registration statement to become effective, if the Board of
Directors of the Company determines in good faith that such registration might
(i) interfere with or affect the negotiation or completion of any transaction
that is being contemplated by the Company (whether or not a final decision has
been made to undertake such transaction) at the time the right to delay is
exercised, or (ii) involve initial or continuing disclosure obligations that
might not be in the best interest of the Company's stockholders. If, after a
registration statement becomes effective, the Company advises the Holder that
the Company considers it appropriate for the registration statement to be
amended, the Holder shall suspend any further sales of its registered Shares
until the Company advises them that the registration statement has been so
amended.
10.4 PIGGYBACK REGISTRATION.
(1) If at any time or from time to time, the Company
shall determine to register any of its common stock, for its own
account or the account of any of its shareholders, other than a
registration relating solely to employee benefit plans, or a
registration relating solely to a Securities and Exchange Commission
Rule 145 transaction, the Company will:
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(i) give Holder written notice thereof as soon as
practicable prior to filing the registration
statement; and
(ii) include in such registration and in any
underwriting involved therein, all the Shares
specified in a written request, made within 15
days after receipt of such written notice from
the Company, by Holder, except as set forth in
subsection (b) below.
(2) If the registration is for a registered public
offering involving an underwriting, the Company shall so advise the
Holder as part of the written notice given pursuant to subsection
(a)(i), above. Holder shall (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 10.4(b), if the
managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of Shares to be included in the
registration and underwriting. The Company shall so advise the Holder,
and the number of Shares that may be included in the registration and
underwriting shall be reduced to an amount acceptable to the
underwriter. If Holder disapproves of the terms of any such
underwriting, it may elect to withdraw such Shares from registration.
11. LIMITATION OF RIGHTS. This Warrant does not confer upon the
record Holder hereof any voting rights or other rights as a stockholder of the
Company, either at law or equity. The rights of the Holder are limited to those
expressed herein and the Holder by acceptance hereof, consents to and agrees to
be bound by and to comply with all the provisions of this Warrant.
12. "MARKET STAND-OFF" AGREEMENT. Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any common stock of the Company
held by it at any time during such period except common stock included in such
registration statement; provided, however, that such market stand-off time
period shall not exceed 180 days. In order to enforce this covenant, the Company
may impose stop-transfer instructions with respect to the Shares of Holder until
the end of such period.
13. REPLACEMENT OF WARRANTS. On receipt of certification of the
Holder reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company or, in the case of mutilation, on surrender and
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cancellation of this Warrant, the Company at its expense shall execute and
deliver, in lieu of this Warrant, a new warrant of like tenor.
14. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
15. 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 mailed by first-class registered or certified mail, postage
prepaid, at such address as may have 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.
16. GOVERNING LAW. This warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the state of Delaware.
THE MANAGEMENT NETWORK GROUP, INC.
By:
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Name:
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Title:
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Address:
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Date:
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AGREED AND ACCEPTED:
XXXXXXXX COMMUNICATIONS, INC.
By:
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Name:
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Title:
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Address:
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Date:
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the Common Stock
of The Management Network Group, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
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(Name)
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(Address)
3. The undersigned represents that 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.
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(Signature)
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(Date)
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APPENDIX 2
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer
of the attached Warrant. Capitalized terms have the same meanings ascribed to
them in the Warrant.
FOR VALUE RECEIVED
("Assignor")
hereby sells, assigns and transfers unto
("Assignee")
(Name)
(Address)
the right to purchase shares of Common Stock of The Management Network Group,
Inc. evidenced by the attached Warrant, together with all right, title and
interest therein, and does irrevocably constitute and appoint
________________________________________ attorney to transfer the said right on
the books of said corporation with full power of substitution in the premises.
In satisfaction of a condition to the effectiveness of this assignment,
Assignor hereby certifies that Assignee is an entity controlled by or under
common control with Assignor.
Date: Assignor:
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By:
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Name:
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Title:
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