Page 1
ENOTE.COM, INC.
COMMON STOCK PURCHASE WARRANT
DATED APRIL 2, 1999
EXERCISABLE AT ANY TIME AT OR PRIOR TO
3:30 P.M. EASTERN STANDARD TIME ON MARCH 31, 2004
To Purchase the number of Shares Determined in Section 1
THESE SECURITIES (THE "SECURITIES") HAVE BEEN (I) ACQUIRED FOR INVESTMENT; (II)
ISSUED AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES LAWS OF VARIOUS STATES; AND (III) ISSUED AND SOLD IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
PROVIDED BY SECTION 4(2) OF THE 1933 ACT. THE SECURITIES CANNOT BE OFFERED FOR
SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO (A) AN EFFECTIVE REGISTRATION
UNDER THE ACT OR ANY TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE ACT;
AND (B) EVIDENCE SATISFACTORY TO THE ISSUER OF COMPLIANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO RELY
UPON AN OPINION OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH
THE ABOVE LAWS.
This Common Stock Warrant ("Warrant") is issued as of the date set forth
above by eNote.Com, Inc., a Delaware corporation (the "Company"), to Friedlander
International Limited or registered assigns (the "Holder"). This Warrant is part
of a series of 2,000,000 Common Stock Warrants ("Warrants") issued in connection
with the offer and sale by the Company of $5,000,000 in convertible preferred
stock.
WITNESSETH:
1. Issuance of Warrant: Term. For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to the Holder, subject to the provisions hereinafter set forth, the right
to purchase 2,000,000 shares of common stock, par value $.01 per share ("Common
Stock"), of the Company,subject to adjustment as provided herein.
2. Exercise Price. The exercise price (the "Exercise Price") per share for
the Shares that may be purchased pursuant to the terms of this Warrant shall be
$1 per share, subject to adjustment as provided herein.
3. Exercise of Warrants.
(a)Exercise Procedures. Prior to the Expiration Date, this Warrant may be
exercised at any time, from time to time, by the Holder hereof, subject
to the conditions set forth herein, by (i) delivering to the Company the
written notice on the Form of Election to purchase attached hereto as
Exhibit "A," specifying the number of Shares that the Holder has elected
to purchase, (ii) surrendering this Warrant to the Company, and (iii)
delivering to the Company payment (in the manner set forth in Section
3(b) hereof) of the aggregate Exercise Price for the Shares to be
purchased. The date of the exercise of the purchase of any Shares to be
purchased pursuant to this Warrant shall be deemed to be the date of
receipt by the Company of the Form of Exercise duly completed and signed
by the Holder, this Warrant and the appropriate aggregate Exercise Price.
(b)Payment of Exercise Price; Expenses. The aggregate Exercise Price for the
Shares to be purchased pursuant to the exercise of this Warrant shall be
paid to the Company at the Company Office in cash, by wire transfer or by
certified or official bank check. The Company shall pay all expenses,
taxes and other charges payable in connection with the preparation,
execution and delivery of stock certificates pursuant to this Section 3,
except that, in the case of stock certificates that have been registered
in a name or names other than the names of the registered holder of this
Warrant, funds sufficient to pay all stock transfer taxes which shall be
payable upon the execution and delivery of such stock certificate or
certificates, shall be paid by the registered holder hereto to the
Company at the time of delivering this Warrant to the Company as
mentioned above.
(c)Exercise of Fewer Than All Warrants. If the Holder exercises this Warrant
with respect to fewer than all of the Shares that may be purchased
hereunder, then upon surrender of this Warrant at the Company Office by
the registered Holder hereof in person or by attorney and the Form of
Exercise duly authorized in writing, this Warrant will be exchanged for a
similar Warrant, representing the right to purchase the remaining number
of Shares subject to purchase hereunder.
(d)Denominations of Warrants. This Warrant may be exchanged for new Warrants
in different denominations at the option of the Holder by the surrender
of this Warrant to the Company at the Company Office accompanied by
written instructions setting forth the denominations of the new Warrants.
(e)Fractional Shares. No fractional shares of Common Stock will be issued
upon the exercise of this Warrant, but in lieu thereof, a cash payment
will be made to the Holder in an amount equal to any fractional share
resulting from the calculation of the number of Shares to be purchased in
accordance with the provisions in Section 1 hereof multiplied by the
Exercise Price determined in Section 2 hereof.
4. Anti-dilution Protection. The applicable Exercise Price per share
determined in Section 2 hereof and the number of Shares issuable upon exercise
of this Warrant determined in Section 1 hereof are subject to weighted average
adjustment from time to time upon the occurrence hereafter of certain
transactions by the Company, including unauthorized sales of securities as
described in Section 5(b)(iv) of the Certificate of Powers, Designations,
Preferences And Rights Of The Convertible Preferred Stock of the Company dated
April 5, 1999, dividends of stock or other securities or property, (stock
splits, reverse stock splits, subdivisions, combinations, recapitalizations,
reorganizations, reclassifications, consolidations, mergers or sales of
properties and assets and dissolution (collectively, "Reorganization"). In the
event that the outstanding Common Stock of the Company is at any time increased
or decreased solely by reason of such an event, appropriate adjustments in the
number and kind of such securities then subject to this Warrant shall be made
effective as of the date of such occurrence so that the interest of the Holder
upon exercise will be the same as it would have been had such Holder owned the
underlying securities immediately prior to the occurrence of such event. Such
adjustment shall be made successively whenever any Reorganization shall occur.
Notwithstanding the foregoing, no adjustment shall be required under this
Section 4 until the cumulative adjustments result in a dilution to the Holder of
1 % or more.
5. Transferability. The Warrants are transferable on the books of the Company at
the Company Office by the registered Holder hereof in person or by attorney duly
authorized in writing, upon surrender of this Warrant to the Company for
transfer. Upon any such transfer, a new Warrant to purchase a like number of
Shares will be issued to the transferee or transferees in exchange for this
Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of an agreement of indemnity (without security
therefor, and upon surrender and cancellation of this Warrant, if mutilated),
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any exchange, transfer or replacement. The
Company shall pay all expenses, taxes (other than stock transfer taxes) and
other charges payable in connection with the preparation, execution and delivery
of this Warrant pursuant to this Section.
6. Holder Not a Shareholder. No Holder of this Warrant shall, solely by reason
of being a Holder hereof, possess any right or privilege as a shareholder of the
Company, including without limitation, the right to vote or receive dividends or
be deemed for any purpose the holder of Common Stock or of any other securities
of the Company which may at any time be issuable on the exercise hereof, until
the Holder shall have exercised all or any part of this Warrant in accordance
with the provisions set forth in Section 3 hereof. Nothing contained herein
shall be construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or, to receive notice of the meetings, until the
Warrant shall have been exercised as provided in Section 3 hereof.
7. Covenants and Conditions. The provisions of this Warrant are subject to the
following covenants and conditions:
(a)Restricted Shares. Neither this Warrant nor the Shares have been registered
under the Act or the securities laws of any state (the "Blue Sky Laws"). By
receiving this Warrant, the Holder hereof acknowledges that the Holder is
acquiring this Warrant for investment purposes only, for his own account and not
with a view to the distribution or resale of this Warrant without an effective
registration for this Warrant under the Act and applicable Blue Sky Laws or an
opinion of counsel reasonably satisfactory to the Company and its counsel that
registration is not required under the Act or any applicable Blue Sky Laws. The
Shares issued upon exercise of this Warrant shall be restricted securities under
the Act and applicable Blue Sky Laws, and the certificates representing the
Shares shall bear a restrictive legend in substantially the same form as set
forth on the cover page of this Warrant.
Other legends as required under federal or state laws may be placed on the
certificates evidencing any Shares purchased hereunder. The Holder hereof agrees
to execute such other documents and instruments as counsel for the Company
reasonably deems necessary to effect the compliance of the issuance of this
Warrant and any Shares issued upon exercise hereof with applicable federal and
state securities laws.
(b)Reservation of Shares. The Company covenants and agrees that the Shares to be
issued upon the exercise of this Warrant shall, upon issuance and payment
therefor in accordance with the terms hereof be legally and validly authorized,
issued and outstanding, fully paid and nonassessable and free from preemptive
rights. The Company shall at all times reserve and keep available for issuance
upon the exercise of this Warrant such number of authorized but unissued shares
of Common Stock as will be sufficient to permit the exercise in full of this
Warrant and all other outstanding Warrants, taking into account for this
purpose, any adjustments to the Shares purchasable under this Warrant as
provided under Section 4 hereof.
(c)Affirmative and Restricted Covenants. The Company will at all times take such
action in good faith as may be necessary or appropriate in order to preserve the
rights of the Holder. The Company will not, by amendment of its certificate of
incorporation, enter into any reorganization, transfer of assets, consolidation,
merger, issue or sale of securities or otherwise avoid or take any action which
would have the effect of avoiding 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 carrying out all of the provisions of this Warrant
and in taking all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against dilution or other
impairment.
(d)Financial information. So long as this Warrant or any part hereof remains
outstanding, the Company shall furnish to the Holder: (i) unaudited, quarterly
financial statements of the Company within forty-five (45) days after the end of
each fiscal quarter; (ii) financial statements of the Company for each fiscal
year within ninety (90) days after the end of the fiscal year, audited by a
national accounting firm; and (iii) such other financial information of the
Company as the Holder may reasonably request in writing, provided that such
other financial information is prepared by the Company in the ordinary course.
8. Registration Rights.
(a)Piggy-back Registration. If at any time after the date hereof, the Company
determines to file a registration statement under the Securities Act relating to
a proposed sale to the public by the Company of shares of Common Stock (but
excluding registrations on Form S-4 or Form S-8 or similar forms hereafter in
effect), the Company shall:
(i) promptly give to each Warrantholder written notice thereof (which will
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws, the proposed offering price, and the plan of distribution);
(ii) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Common Stock specified in a written notice to the Company by any Warrantholder;
and
(iii) use its best efforts to cause the managing underwriter or underwriters of
such proposed underwritten offering to permit the Common Stock requested to be
included in the Registration Statement for such offering to be included on the
same terms and conditions as any similar securities of the Company included
therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering deliver a written opinion to the Warrantholders
that marketing considerations require a limitation in the number of shares of
Common Stock offered pursuant to any Registration Statement filed under this
Section, then, subject to the advice of said managing underwriter or
underwriters as to the size and composition of the offering, such limitation
shall be imposed among the Warrantholders.
(b) Demand Registration. The Company hereby agrees that upon the written request
of a majority in interest of the holders of Warrants or the shares of Common
Stock which have been or could be issued or are issuable upon exercise of the
Warrants, it will use its best efforts in accordance with the terms of this
Section 8 to effect the registration under the Act of any Shares purchased
pursuant to the terms of this Warrant; provided, however, that such request
shall not be made until 180 days after the effective date of any registration
statement for a public offering of securities by the Company where the Holder
was afforded an opportunity to sell shares of Common Stock pursuant to the
Piggy-back Registration rights set forth in sub-paragraph (a) of this Section 8.
Such registration is herein sometimes referred to as the "Demand Registration."
In connection with such Demand Registration, the Company will give written
notice (a "Notice of Registration") to all of the Holders, of its intent to
effect the Demand Registration under the Act of the Shares. The Holders shall
then provide the Company, within 15 days after the giving of the Notice of
Registration, a written response which shall specify the number of Shares to be
registered and the intended method of disposition thereof. The Company shall not
be required to effect more than two Demand Registrations under this Section 8.
It is understood and agreed that the Company's obligation to register the Shares
hereunder may be fulfilled by either a Company-sponsored "shelf" registration or
through an underwritten public offering and that if participation in either one
of such types of registration is offered to the Holders, and that if a Holder
shall be offered the ability to and shall decline to participate in such Demand
Registration, such offer and declination shall be deemed to constitute a waiver
of one of the Demand Registration rights granted hereunder.
(c)Registration Statement Form. The Demand Registration shall be on such
appropriate registration form promulgated by the Commission as shall be selected
by the Company, and shall permit the disposition of the Shares covered thereby
in accordance with the intended method or methods specified by the Holders in
their request for such registration.
(d)Registration Expenses. The Company will pay all Registration Expenses
incurred in connection with the Demand Registration.
(e)Right to Include Shares in Registration. The Company may include in the
registration statement related to the Demand Registration securities on its own
behalf. The amount of securities that the Company may include in the
registration statement relating to such Demand Registration on its own behalf
shall be determined at the Company's sole discretion, taking into consideration
all contractual registration rights then outstanding to all parties.
(f)Delay of Company's Registration Obligations. Notwithstanding the foregoing,
the Company may postpone taking action with respect to the Demand Registration
for a reasonable period if, in the good faith opinion of the Company's Board of
Directors, effecting the registration would adversely affect a material
financing, acquisition, disposition of assets or stock, merger or other
comparable transaction or would require the Company to make public disclosure of
information, the public disclosure of which would have a materially adverse
effect upon the Company, provided that the Company shall not delay such action
pursuant to this sentence more than once in any 6- month period.
(g)Termination of Rights. The registration rights granted hereunder shall not
terminate until they are waived in writing by the Holder.
9. Registration Procedures. If and whenever the Company is required to use its
best efforts to effect the Demand Registration of any Shares under the Act
pursuant to Section 8, the Company will use its best efforts to effect the
Demand Registration and sale of such Shares in accordance with the intended
methods of disposition thereof specified by the Holders. Without limiting the
foregoing, the Company will, as expeditiously as possible:
(a)prepare and file with the Commission as soon as practicable, unless delayed
pursuant to Section 8(f), the requisite registration statement to effect such
Registration and use its best efforts to cause such registration statement to
become effective, provided that as far in advance as practical before filing
such registration statement or any amendment thereto, the Company will furnish
to the Holders who have elected to participate in such Registration. copies of
reasonably complete drafts of all such documents proposed to be filed (including
exhibits), and any such Holder shall have the opportunity to object to any
information pertaining solely to such Holder that is contained therein, and the
Company will make the corrections reasonably requested by such Holder with
respect to such information prior to filing any such registration statement or
amendment;
(b)prepare and file with the Commission such amendments and supplements to such
registration statements, financial statements and any prospectus used in
connection therewith as may be necessary to maintain the effectiveness of such
registration statement and to comply with the provisions of the Act with respect
to the disposition of all Shares covered by such registration statement, in
accordance with the intended methods of disposition thereof, until the earlier
of (i) such time as all of such Shares have been disposed of in accordance with
the intended methods of disposition by the Holder or Holders thereof set forth
in such registration statement and (ii) one year after such registration
statement becomes effective;
(c)promptly notify each Holder of Shares who has elected to participate in such
Registration and the underwriter or underwriters, if any:
(i) when such registration statement or any prospectus used in connection
therewith, or any amendment or supplement thereto, has been filed and, with
respect to such registration statement or any post-effective amendment thereto.
when the same has become effective;
(ii) of the notification to the Company by the Commission of its initiation of
any proceeding with respect to the issuance by the Commission of, or of the
issuance by the Commission of, any stop order suspending the effectiveness of
such registration statement; and
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Shares for sale under the applicable Blue
Sky Laws of any jurisdiction;
(d)furnish to each Holder of Shares covered by such registration statement such
number of conformed copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits and documents
incorporated by reference), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 promulgated
under the Act relating to such Holder's Shares, and such other documents, as
such Holder may reasonably request to facilitate the disposition of its Shares;
(e)use its best efforts to register or qualify all Shares covered by such
registration statement under the Blue Sky Laws of such jurisdictions as each
Holder thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in such jurisdictions of the
Shares owned by such Holder, except that the Company shall not for any such
purpose be required (i) to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this Section 9(e) be obligated to be so qualified, or (ii) to subject itself to
taxation in any such jurisdiction;
(f)use its best efforts to cause all Shares covered by such registration
statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable each holder thereof to consummate
the disposition of such Shares;
(g)notify each Holder of Shares covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the request of
any such holder promptly prepare and furnish to such Holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(h)otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 promulgated thereunder;
(i)make available for inspection by any Holder who has elected to participate in
such registration statement, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement, and permit the Inspectors to participate in
the preparation of such registration statement and any prospectus contained
therein and any amendment or supplement thereto. Records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public. The Holder of Shares agrees by acquisition of such
Shares that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(j)provide a transfer agent and registrar for all Shares covered by such
registration statement not later than the effective date of such registration
statement; and
(k)use its best efforts to cause all Shares covered by such registration
statement to be listed, upon official notice of issuance, on any securities
exchange on which any of the securities of the same class as the Shares are then
listed.
The Company may require each Holder of Shares as to which any registration is
being effected to, and each such Holder, as a condition to including Shares in
such Registration, shall, furnish the Company with such information and
affidavits regarding such Holder and the distribution of such securities as the
Company may from time to time reasonably request in writing in connection with
such Registration.
Each Holder of Shares agrees by acquisition of such Shares that upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 9(g), such Holder will forthwith discontinue such Holder's
disposition of Shares pursuant to the registration statement relating to such
Shares until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 9(g) and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
relating to such Shares current at the time of receipt of such notice.
10.Underwritten Offerings. In the case of an underwritten Public Offering, the
Lead Underwriter, if any, shall be any underwriter or underwriters as shall be
selected by the Company, in its sole discretion. The Company shall enter into an
underwriting agreement in customary form with such underwriter or underwriters,
which shall include, among other provisions, indemnities to the effect and to
the extent provided in Section 11 unless otherwise agreed to by the Lead
Underwriter and a Holder or Holders of Shares to be distributed by such
underwriters. The Holders of Shares to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters also be
made to and for their benefit and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement also be
conditions precedent to their obligations. Unless otherwise agreed to by the
Lead Underwriter and a Holder or Holders of Shares to be distributed by such
underwriters, no Holder of Shares shall be required to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder and its
ownership of the securities being registered on its behalf and such Holder's
intended method of distribution and any other representation required by law. No
Holder may participate in such underwritten offering unless such Holder agrees
to sell its Shares on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and
other documents reasonably and customarily required under the terms of such
underwriting agreement. If any Holder disapproves of the terms of an
underwriting prior to the effectiveness of the registration statement, such
Holder may elect to withdraw therefrom and from such registration by notice to
the Company and the Lead Underwriter.
11.Indemnification.
(a)Indemnification by the Company. The Company shall, to the full extent
permitted by law, indemnify and hold harmless each Holder of Shares included in
any registration statement filed in connection with a registration under
Sections 8, 9 or 10 hereof, its directors and officers, and each other Person,
if any, who controls any such Holder within the meaning of the Act, against any
losses, claims, damages, expenses or liabilities, joint or several (together,
"Losses"), to which such Holder or any such director or officer or controlling
Person may become subject under the Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, and the
Company will reimburse such Holder and each such director, officer and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such Loss (or action or
proceeding in respect thereof); provided that the Company shall not be liable in
any such case to the extent that any such Loss (or action or proceeding in
respect thereof) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Holder or any such director, officer or controlling
Person, and shall survive the transfer of Shares by such Holder. The Company
shall also indemnify each other Person who participates (including as an
underwriter) in the offering or sale of Registrable Securities, their officers
and directors and each other Person, if any, who controls any such participating
Person within the meaning of the Act to the same extent as provided above with
respect to Holders of Shares.
(b)Indemnification by the Holders. Each Holder of Shares which are included or
are to be included in any registration statement filed in connection with any
registration under Sections 8, 9 or 10 hereof, as a condition to including
Shares in such registration statement, shall, to the full extent permitted by
law, indemnify and hold harmless the Company, its directors and officers, and
each other Person, if any, who controls the Company within the meaning of the
Act, against any Losses to which the Company or any such director or officer or
controlling Person may become subject under the Act or otherwise, insofar as
such Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such Holder specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the obligation to provide indemnification
pursuant to this Section 11(b) shall be several, and not joint and several,
among such indemnifying Parties on the basis of the number of Shares included in
such registration statement and the aggregate amount which may be recovered from
any Holder of Shares pursuant to the indemnification provided for in this
Section 11(b) in connection with any registration and sale of Shares shall be
limited to the total proceeds (including commissions and underwriting discounts)
received by such Holder from the sale of such Shares. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such Shares by such Holder. Such Holders shall
also indemnify each other Person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors
and each other Person, if any, who controls any such participating Person within
the meaning of the Act to the same extent as provided above with respect to the
Company.
(c)Notices of Claims, etc. Promptly after receipt by an Indemnified Party of
notice of the commencement of any action or proceeding involving a claim
referred to in Section 11(a) or 11(b), such Indemnified Party will, if a claim
in respect thereof is to be made against an indemnifying Party pursuant to such
subsections, give written notice to the latter of the commencement of such
action, provided that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the indemnifying Party of its obligations
under the preceding paragraphs of this Section 11, except to the extent that the
indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, the indemnifying
Party shall be entitled to participate in and, unless, in the reasonable
judgment of any Indemnified Party, a conflict of interest between such
Indemnified Party and any indemnifying Party exists with respect to such claim,
to assume the defense thereof, jointly with any other indemnifying Party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the indemnifying Party shall not be liable to such Indemnified Party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation; provided that the indemnified Party or Indemnified Parties shall
have the right to employ one counsel to represent it or them if, in the
reasonable judgment of the Indemnified Party or Indemnified Parties, it is
advisable for it or them to be represented by separate counsel by reason of
having legal defenses which are different from or in addition to those available
to the indemnifying Party, and in that event the reasonable fees and expenses of
such one counsel shall be paid by the indemnifying Party. If the indemnifying
Party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
the Indemnified Parties with respect to such claim, unless in the reasonable
judgment of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other indemnified Parties with respect to such claim,
in which event the indemnifying Party shall be obligated to pay the fees and
expenses of such additional counsel for the Indemnified Parties or counsels. No
indemnifying Party shall consent to entry of any judgment or enter into any
settlement without the consent of the Indemnified Party which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No indemnifying Party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
(d)Contribution. If the indemnity and reimbursement obligation provided for in
any subsection of this Section 11 is unavailable or insufficient to hold
harmless an Indemnified Party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the indemnifying Party
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
Party, on the one hand, and the Indemnified Party, on the other hand, in
connection with statements or omissions which resulted in such Losses, as well
as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this paragraph were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the first sentence of this
paragraph. The amount paid by an Indemnified Party as a result of the Losses
referred to in the first sentence of this Section 11(d) shall be deemed to
include any legal and other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any Loss which is the
subject of this Section 11(d).
No Indemnified Party guilty of fraudulent misrepresentation (within the meaning
of Section 1 l(f) of the Act) shall be entitled to contribution from the
Indemnifying Party if the indemnifying Party was not guilty of such fraudulent
misrepresentation.
(e)Other Indemnification. Indemnification similar to that specified in the
preceding paragraphs of this Section 11 (with appropriate modifications) shall
be given by the Company and each Holder of Shares with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Act reasonable and
customary in scope and effect. The provisions of this Section 11 shall be in
addition to any other rights to indemnification or contribution which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.
(f)Indemnification Payments. The indemnification required by this Section 11
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Losses are
incurred.
12.Covenants Relating to Rule 144. The Company will file reports in compliance
with the Exchange Act, will comply with all rules and regulations of the
Commission applicable in connection with the use of Rule 144 and take such other
actions and furnish any Holder with such other information as such Holder may
request in order to avail itself of such rule or any other rule or regulation of
the Commission allowing such Holder to sell any Shares without registration, and
will, at its expense, forthwith upon the request of any Holder, deliver to such
Holder a certificate, signed by the Company's principal financial officer,
stating (a) the Company's name, address and telephone number (including area
code), (b) the Company's Internal Revenue Service identification number, (c) the
Company's Commission file number, (d) the number of shares of each class of
stock outstanding as shown by the most recent report or statement published by
the Company, and (e) whether the Company has filed the reports required to be
filed under the Exchange Act for a period of at least 90 days prior to the date
of such certificate and in addition has filed the most recent annual report
required to be filed thereunder. If at any time the Company is not required to
file reports in compliance with either Section 13 or Section l5(d) of the
Exchange Act, the Company at its expense will, forthwith upon the written
request of the Holder of any Shares, make available adequate current public
information with respect to the Company within the meaning of paragraph (c)(2)
of Rule 144.
13.Redemption of Warrants. The Warrants shall be subject to redemption by
the Company, in whole or in part, on the following terms and conditions.
(a) During the period between the date of this Warrant Agreement and April 1,
2000, the Company may repurchase up to 500,000 Warrants for a redemption price
which is equal to the greater of (i) $3 per Warrant, or (ii) the average closing
bid price of the Company's Common Stock, as reported on the Nasdaq market or
other principal trading market on which the Common Stock is then traded, during
the 30 calendar days immediately preceding the date of the notice of redemption.
Notwithstanding the generality of the foregoing, if the Company mails a notice
of redemption and the Warrantholder exercises the number of Warrants called for
redemption in such notice within 10 days of the date of such notice, then notice
of redemption shall be null and void and the number of Warrants subject to
redemption by the Company pursuant to the terms of this Section 13(a) shall be
reduced by the number of Warrants so exercised.
(b) During the period between April 2, 2000 and April 1, 2001, the Company may
repurchase up to 500,000 Warrants (or 1,000,000 Warrants if the redemption
option set forth in subparagraph (a) has not been exercised) for a redemption
price which is equal to the greater of (i) $7 per Warrant, or (ii) the average
closing bid price of the Company's Common Stock, as reported on the Nasdaq
market or other principal trading market on which the Common Stock is then
traded, during the 30 calendar days immediately preceding the date of the notice
of redemption. Notwithstanding the generality of the foregoing, if the Company
mails a notice of redemption and the Warrantholder exercises the number of
Warrants called for redemption in such notice within 10 days of the date of such
notice, then notice of redemption shall be null and void and the number of
Warrants subject to redemption by the Company pursuant to the terms of this
Section 13(b) shall be reduced by the number of Warrants so exercised.
(c) During the period between April 2, 2001 and April 1, 2002, the Company may
repurchase all remaining unexercised Warrants for a redemption price which is
equal to the greater of (i) $10 per Warrant, or (ii) the average closing bid
price of the Company's Common Stock, as reported on the Nasdaq market or other
principal trading market on which the Common Stock is then traded, during the 30
calendar days immediately preceding the date of the notice of redemption.
Notwithstanding the generality of the foregoing, if the Company mails a notice
of redemption and the Warrantholder exercises the number of Warrants called for
redemption in such notice within 10 days of the date of such notice, then notice
of redemption shall be null and void and the number of Warrants subject to
redemption by the Company pursuant to the terms of this Section 13(c) shall be
reduced by the number of Warrants so exercised.
(d) Notwithstanding any other provision of this Section 13, the Company shall
not have any right of redemption with respect to any Warrants that have been
exercised by the Holder, and after April 1, 2002 all redemption rights set forth
herein shall terminate.
14.Definitions. Unless the context otherwise requires, (i) words of any gender
include each other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms "hereof, "
"herein, " "hereby" and derivative or similar words refer to this entire
Warrant; and (iv) the term "Section" refers to the specified Section of this
Warrant. Whenever this Warrant refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. Except as otherwise
specifically indicated, the following terms will have the following meanings for
all purposes of this Warrant:
(a)"Business Day " means a day other than Saturday, Sunday or any other day on
which banks located in the State of New York are authorized or obligated to
close.
(b)"Common Stock" means shares of the Company's common stock, par value $.01 per
share, as constituted on the date of this Warrant, and any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock.
(c)"Commission" means the United States Securities and Exchange Commission, or
any successor governmental agency or authority.
(d)"Company" means eNote.Com, inc.
(e)"Exchange Act " means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
(f)"Holder" means the initial Holder of this Warrant and any transferee,
successors or assigns.
(g)"Holders" means the initial Holders of the Warrants and any transferee,
successors or assigns.
(h)"Indemnified Party" means a party entitled to indemnity in accordance with
Section 11.
(i)"Indemnifying Party" means a party obligated to provide indemnity in
accordance with Section 11.
(j)"Inspectors" has the meaning ascribed to it in Section 9(i).
(k)"Lead Underwriter" means, with respect to any Public Offering, the
underwriter managing such Public Offering.
(1)"Losses" has the meaning ascribed to it in Section 11(a).
(m)"NASD" means the National Association of Securities Dealers, inc.
(n)"Person" means any natural person, corporation, general partnership, limited
partnership, proprietorship, other business organization, trust, union or
association.
(o) Public Offering" means any offering of Common Stock to the public, either on
behalf of the Company or any of its security Holders, pursuant to an effective
registration statement under the Act.
(p)"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with its obligations under this Warrant to effect
the registration of Shares in a registration under Sections 8, 9 or 10 hereof,
including, without limitation, all registration, filing, securities exchange
listing and NASD fees, all registration, filing, qualification and other fees
and expenses of complying with state securities laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, premiums and other costs of policies of insurance against
liabilities arising out of the Public Offering of the Shares being registered
and any fees and disbursements of underwriters customarily paid by issuers or
Holders of securities, but excluding underwriting discounts and commissions or
brokerage fees and transfer taxes, if any, in respect of Shares, which shall be
payable by each Holder thereof.
(q)"Rule 144" means Rule 144 promulgated by the Commission under the Act, and
any successor provision thereto.
(r)"Act" means the Act of 1933, as amended. and the rules and regulations
promulgated thereunder.
(s)"Shares" means the shares of Common Stock issuable to the Holders of the
Warrants upon the exercise thereof, and any additional shares of Common Stock
issued or distributed by way of a dividend, stock split or other distribution in
respect of the Shares.
(t) "Warrant" means this Warrant.
(u) "Warrantholder" means the purchaser of this Warrant or any assingee therof.
(v)"Warrants" means the series of Warrants being granted by the Company in
connection with the offering and sale of the preferred stock.
15.Miscellaneous.
(a)Notices. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers: (i) if to the Holder,
to the name, address and facsimile number set forth in the Purchase and Sale
Agreement executed in connection with the purchase of this Warrant or any other
address or facsimile number delivered to the Company in writing or to the name,
address and facsimile number of any transferee of this Warrant as set forth on
the form of Assignment attached hereto; and (ii) if to the Company, to
eNote.Com, Inc., One Lawson, Lane, Third Floor, Burlington, Vermont 054402.
With respect to any other Holder of Shares, such notices, requests and other
communications shall be sent to the addresses set forth in the stock transfer
records regularly maintained by the Company. All such notices, requests and
other communications will (i) if delivered personally to the address as provided
in this Section, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed
given upon receipt, and (iii) if delivered by mail in the manner described above
to the address as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section l5(a)). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
(b)Waiver. Any term or condition of this Warrant may be waived at any time by
the Holder, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the Holder. No waiver by the Holder
of any term or condition of this Warrant, in any one or more instances, shall be
deemed to be or construed as a waiver of the same term or condition of this
Warrant on any future occasion.
(c)Successors and Assigns. This Warrant inures to the benefit of and is
enforceable by the Holder hereof and the Holder's respective successors
and assigns.
(d)Headings. The headings used in this Warrant have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(e)Invalid Provisions. If any provision of this Warrant is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of the Holder hereof will not be materially and adversely affected
thereby, (i) such provision will be fully severable, (ii) this Warrant will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (iii) the remaining provisions of this
Warrant will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom and
(iv) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Warrant a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
(g)Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws principles thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed and delivered by the
duly authorized officer of the Company as of the date first above written.
eNote.Com, Inc. Attest:
John A. Varsames, President Secretary
eNote.Com, Inc.
WARRANT EXERCISE FORM
Number of Warrants Exercised ______________
The undersigned hereby irrevocably elects to exercise the right to purchase
represented by the within Warrant for, and to purchase thereunder, __________
shares of the stock provided for therein, and requests that certificates for
such shares be issued in the name of:
- ------------------------------------------
(Name and Social Security Number)
- ------------------------------------------
(Street Address)
- ------------------------------------------
(City, State, Zip Code)
and if said number of shares shall not be all the shares purchasable thereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of the undersigned Warrantholder or his
Assignee as below indicated and delivered to the address stated below.
Dated:__________________, 19__
- ------------------------------------------
(Name of Warrantholder or Assignee)
- ------------------------------------------
(Street Address)
- ------------------------------------------
(City, State, Zip Code)
- ------------------------------------------
(Signature of Warrantholder)
- ------------------------------------------
(Signature of Warrantholder)
ASSIGNMENT
(To Be Executed Only Upon the Assignment of the Warrant)
For Value Received, the undersigned hereby sells assigns and transfers unto
- ------------------------------------------
(Name and Social Security Number of Assignee)
- ------------------------------------------
(Street Address)
- ------------------------------------------
(City, State, Zip Code)
the within Warrant, hereby irrevocably constituting and appointing
________________________ as his true and lawful attorney in fact to transfer
said Warrant on the books of the Company, with full power of substitution in the
premises.
Dated:__________________, 19__
- ------------------------------------------
(Signature of Warrantholder)
- ------------------------------------------
(Signature of Warrantholder)
Note: The above signature must correspond with the name written upon the face of
this Warrant in every particular, without alteration or enlargement or any
change whatever unless this Warrant has been assigned.