(c) Transfer Restrictions; Warrant Shares By the acceptance hereof, the Holder agrees that during any period of 30 consecutive Trading Days it shall not sell on any Trading Market on which the Common Stock is then listed or traded such number of Warrant Shares as is greater than 20% of the trading volume of the Common Stock on the principal trading market of the Common Stock during the immediately preceding 30 Trading Days; provided, that, if, at any time after the date hereof, the Company agrees with any of its or its Affiliates’ then executive officers or directors or any Person who then beneficially owns more than 5.00% of the outstanding Common Stock (any of the foregoing being a “Significant Stockholder”) to a limitation on the sale of Common Stock that is less restrictive to such Significant Stockholder than the forgoing restriction set forth herein with respect to the Holder, the foregoing restriction with respect to the Holder shall automatically, and without any action by the Company or the Holder, be deemed to be modified to conform to such less restrictive limitation, which less restrictive limitation shall remain in effect until such time, if any, that the Company agrees to a further less restrictive provision with any Significant Holder. The Company shall notify the Holder not later than two Trading Days after it has entered into with a Significant Stockholder a limitation on the sale of Common Stock that is less restrictive to such Significant Stockholder than the restriction set forth (or deemed to be) set forth herein with respect to the Holder.
i. notwithstanding any calculation of the Company Election Amount pursuant to the formula set forth above, under no circumstances shall the amount payable to Holder pursuant to a Holder Election under this Section 5(a) be less than $500,000;
ii. in the event the Company Election Amount pursuant to the formula set forth above is between $500,000 and $1,000,000, the entire Company Election Amount shall be paid to Holder in cash; and
iii. in the event the Company Election Amount pursuant to the formula set forth above is greater than $1,000,000, an amount equal to $1,000,000 shall be payable in cash, and with respect to any amount payable to Holder in excess of $1,000,000, Holder shall have an election as to whether such excess amount is payable in cash or a number of shares of Common Stock equal to the amount over $1,000,000, based on the Closing Sale Price at the time the Company Election is delivered.
considered no longer outstanding. The “Holder Election Amount” shall be an amount equal to the product of: (A) Warrant Redemption EBITDAmultiplied by(B) five and one half (5.5)multiplied by(C) the percentage ownership interest in the Company (on a fully diluted basis) represented by the Warrant Shares subject to the Holder Election,provided,that:
i. notwithstanding any calculation of the Holder Election Amount pursuant to the formula set forth above, under no circumstances shall the amount payable to Holder pursuant to a Holder Election under this section be less than $500,000;
ii. in the event the calculation of the Holder Election Amount pursuant to the formula set forth above equals an amount greater than $1,000,000, the amount payable to Holder pursuant to a Holder Election under this section shall be disbursed as follows:
A. $1,000,000 in cash; and
B. a number of shares of Common Stock equal to the amount over $1,000,000, based on the Closing Sale Price at the time the Holder Election is delivered;
provided, further,that in the event the foregoing payment of cash to Holder pursuant to a Holder Election would result in the Company having a Qualified Cash balance less than the greater of (i) $500,000, or (ii) 25% of Warrant Redemption EBITDA, immediately after such payment is made, Holder or its assigns will finance a portion of the payment on the terms set forth, and as more particularly described, in Section 2.09 of the Credit Agreement.
For the purposes of this Warrant:
“Warrant Redemption EBITDA” means Consolidated EBITDA (as defined in the Credit Agreement) of the Company for the trailing twelve (12) month period ending on the last day of the immediately preceding fiscal quarter for which financing reports have been delivered. The parties acknowledge that, in computing Warrant Redemption EBITDA, Stock-Based Compensation, as defined in the Credit Agreement, will be limited to $150,000 on a trailing twelve month basis.
Section 6. Miscellaneous.
(a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of this Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Action on Non-Trading Days. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares.
The Company covenants that during the period this Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein
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without violation of any applicable law or regulation, or of any requirements of any stock exchange or trading market upon which the Common Stock may be listed.
Except to the extent waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. The Warrant Shares represent on the date hereof 2.5% of the outstanding Common Stock, calculated on a fully-diluted, as-if exercised basis.
(e) Governing Law; Jurisdiction; Waiver of Trial by Jury. IN ACCORDANCE WITH SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED EXCLUSIVELY IN THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS WARRANT, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. COMPANY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT HOLDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. COMPANY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER ENTERING INTO THE UNDERLYING CREDIT AGREEMENT AND TRANSACTIONS FROM WHICH THIS WARRANT ARISES.
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(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any reasonable costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice, Company Election or Holder Election) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Credit Agreement prior to 5:30 P.M., New York City time, on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Credit Agreement on a day that is not a Trading Day or later than 5:30 P.M., New York City time, on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set forth in the Credit Agreement unless changed with two (2) Trading Days’ prior notice.
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on the date first written above.
CORNERWORLD CORPORATION
By:/s/ Scott N. Beck
Scott Beck
Chairman and Chief Executive Officer
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EXHIBIT A
NOTICE OF EXERCISE
TO: CORNERWORLD CORPORATION
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] lawful money of the United States; or
[ ] the issuance of ______ shares of Common Stock in accordance the Cashless Exercise Right formula set forth in Section 2(c) of the Warrant.
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: ____________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _____________________________________________
Name of Authorized Signatory: ________________________________________________________________
Title of Authorized Signatory: _________________________________________________________________
Date: ___________________________________________________________________________________
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EXHIBIT B
ASSIGNMENT OF WARRANT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________ (the “Transferee”) the right represented by the within Warrant to purchase __________________shares of Common Stock of CornerWorld Corporation (the “Company”) to which the within Warrant relates. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the Company that:
(a) the offer and sale of this Warrant contemplated hereby is being made in compliance with Section 4(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States;
(b) the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;
(c) the undersigned has reviewed Transferee’s Accredited Investor Certification delivered herewith, and has no reason to believe it is not true and accurate; and
(d) the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States.
Dated: _____________________
_______________________________________
(Signature must conform in all respects to name of holder as specified on the face of the Warrant)
Address of Transferee:
_______________________________________
_______________________________________
_______________________________________
_______________________________________
In the presence of:
________________________________________
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