THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
WIRE ONE TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares:
------------------------ -------------
Date of Issuance: June 14, 2000
Wire One Technologies, Inc., a Delaware corporation (the "COMPANY"),
hereby certifies that, for Ten and 50/100 United States Dollars ($10.50) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, _____________________________, the registered holder hereof
or its permitted assigns, is entitled, subject to the terms set forth below, to
purchase from the Company upon surrender of this Warrant, at any time or times
on or after the date hereof, but not after 11:59 P.M. Eastern Time on the
Expiration Date (as defined herein) _______________________ (________) fully
paid and nonassessable shares of Common Stock (as defined herein) of the Company
(the "WARRANT SHARES") at the purchase price per share provided in Section l(b)
below; provided, however, that in no event shall the holder be entitled to
exercise this Warrant for a number of Warrant Shares in excess of that number of
Warrant Shares which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the holder and
its affiliates to exceed 4.99% of the outstanding shares of the Common Stock
following such exercise. For purposes of the foregoing proviso, the aggregate
number of shares of Common Stock beneficially owned by the holder and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such proviso
is being made, but shall exclude shares of Common Stock which would be issuable
upon (i) exercise of the remaining, unexercised Warrants beneficially owned
by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a limitation on
conversion or exercise analogous to the limitation contained herein. Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock a holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or its
transfer agent setting forth the number of shares of Common Stock outstanding.
In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to conversions of Preferred Shares and exercise
of Warrants (as defined below) by such holder and its affiliates since the date
as of which such number of outstanding shares of Common Stock was reported.
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
Warrants (the "PREFERRED SHARE WARRANTS") issued pursuant to Section 1 of that
certain Preferred Stock and Warrant Purchase Agreement dated as of June 14,
2000, among the Company and the Buyer referred to therein (the "SECURITIES
PURCHASE AGREEMENT").
(b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "APPROVED STOCK PLAN" shall mean any employee
benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to
any employee, officer, director, consultant or other service provider
of the Company.
(ii) "BUSINESS DAY" means any day other than
Saturday, Sunday or other day on which commercial banks in the City of
New York are authorized or required by law to remain closed.
(iii) "CERTIFICATE OF DESIGNATION" means the
Certificate of Designations, Preferences and Rights of Series A
Preferred Stock of the Company.
(iv) "CLOSING BID PRICE" means, for any security as
of any date, the last closing bid price for such security at 4:00 p.m.
Eastern Standard Time on the Nasdaq National Market as reported by
Bloomberg Financial Markets ("Bloomberg"), or, if the Nasdaq National
Market is not the principal trading market for such security, the last
closing bid price of such security at 4:00 p.m. Eastern Standard Time
on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last closing bid price of such security in
the over the counter market on the electronic bulletin board for such
security at 4:00 p.m. Eastern Standard Time as reported by Bloomberg,
or, if no closing bid price is reported for such security by Bloomberg,
the last closing trade price for such security as
2
reported by Bloomberg, or, if no last closing trade price is reported
for such security by Bloomberg, the average of the bid and ask prices
of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date on any of the foregoing
bases, the Closing Bid Price of such security on such date shall be the
fair market value as determined in good faith by the Board of Directors
of the Company. (All such determinations to be appropriately adjusted
for any stock dividend, stock split or other similar transaction during
such period.)
(v) "CLOSING SALE PRICE" means, for any security as
of any date, the last closing trade price for such security at 4:00
p.m. Eastern Standard Time on the Nasdaq National Market as reported by
Bloomberg, or, if the Nasdaq National Market is not the principal
securities exchange or trading market for such security, the last
closing trade price of such security at 4:00 p.m. Eastern Standard Time
on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for
such security at 4:00 p.m. Eastern Standard Time as reported by
Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the closing bid and ask price of such security
as reported by Bloomberg, or, if no closing ask or bid prices are
reported for such security by Bloomberg, the average of the bid and ask
prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Sale
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Sale Price of such security on such date
shall be the fair market value as determined in good faith by the Board
of Directors of the Company. (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period).
(vi) "COMMON STOCK" means (i) the Company's common
stock, par value $0.0001 per share, and (ii) any capital stock into
which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
(vii) "COMMON STOCK DEEMED OUTSTANDING" means, at any
given time, the number of shares of Common Stock actually outstanding
at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 8(b)(i) and 8(b)(ii) hereof regardless
of whether the Options (as defined below) or Convertible Securities (as
defined below) are actually exercisable or convertible at such time,
but excluding any shares of Common Stock owned or held by or for the
account of the Company or issuable upon exercise of the Preferred Share
Warrants.
(viii) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly convertible into
or exchangeable for Common Stock.
(ix) "EXPIRATION DATE" means the date five (5) years
from the date of this Warrant or, if such date falls on a Saturday,
Sunday or other day on which banks are required or authorized to be
closed in the City of New York or the State of New York or
3
on which trading does not take place on the principal exchange or
automated quotation system on which the Common Stock is traded (a
"HOLIDAY"), the next date that is not a Holiday.
(x) "MARKET PRICE" means, with respect to any
security for any period, the average Closing Bid Price during the 10
Business Days immediately preceding the date of determination.
(xi) "OPTIONS" means any rights, warrants or options
to subscribe for or purchase Common Stock or Convertible Securities.
(xii) "OTHER SECURITIES" means (i) those warrants of
the Company issued prior to, and outstanding on, the date of issuance
of this Warrant, (ii) the Preferred Shares and (iii) the shares of
Common Stock issued upon conversion of the Preferred Shares.
(xiii) "PERSON" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any
department or agency thereof.
(xiv) "PREFERRED SHARES" means the shares of the
Company's Series A Preferred Stock issued pursuant to the Securities
Purchase Agreement.
(xv) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(xvi) "WARRANT" means this Warrant and all Warrants
issued in exchange, transfer or replacement thereof.
(xvii) "WARRANT EXERCISE PRICE" shall be equal to,
with respect to any Warrant Share, $10.50, subject to adjustment as
hereinafter provided.
(xviii) "WARRANT PERIOD" means the period beginning
on the date hereof and ending on and including the Expiration Date.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to the Company shall be deemed to include the
Company's successors and (B) to any applicable law defined or referred
to herein, shall be deemed references to such applicable law as the
same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein,"
"hereof" and "hereunder," and words of similar import, shall refer to
this Warrant as a whole and not to any provision of this Warrant, and
the words "Section," "Schedule," and "Exhibit" shall refer to Sections
of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
4
(iii) Whenever the context so requires, the neuter
gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time on any Business Day on or after the
opening of business on the date hereof and prior to 11:59 P.M. Eastern Time on
the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "EXERCISE NOTICE"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the applicable Warrant Exercise Price multiplied by the number
of Warrant Shares as to which this Warrant is being exercised (plus any
applicable issue or transfer taxes) (the "AGGREGATE EXERCISE PRICE") in cash or
wire transfer of immediately available funds and (iii) the surrender to a common
carrier for overnight delivery to the Company as soon as practicable following
such date, this Warrant (or an indemnification undertaking with respect to this
Warrant in the case of its loss, theft or destruction); provided, that if such
Warrant Shares are to be issued in any name other than that of the registered
holder of this Warrant, such issuance shall be deemed a transfer and the
provisions of Section 7 shall be applicable. In the event of any exercise of the
rights represented by this Warrant in compliance with this Section 2(a), the
Company shall on the third Business Day following the date of receipt of the
Exercise Notice, the Aggregate Exercise Price and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the "EXERCISE DELIVERY DOCUMENTS"), credit such
aggregate number of shares of Common Stock to which the holder shall be entitled
to the holder's or its designee's balance account with The Depository Trust
Company; provided, however, if the holder who submitted the Exercise Notice
requested physical delivery of any or all of the Warrant Shares, then the
Company shall, on or before the third Business Day following receipt of the
Exercise Delivery Documents, issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (ii) above or notification to the Company of a Cashless Exercise referred
to in Section 2(e), the holder of this Warrant shall be deemed for all corporate
purposes to have become the holder of record of the Warrant shares, with respect
to which this Warrant has been exercised, irrespective of the date of delivery
of this Warrant as required by clause (iii) above or the certificates evidencing
such Warrant Shares. In the case of a dispute as to the determination of the
Warrant Exercise Price, the last reported sale price (as reported by Bloomberg)
or the Market Price of a security or the arithmetic calculation of the Warrant
Shares, the Company shall promptly issue to the holder the number of shares of
Common Stock that is not disputed and shall submit the disputed determinations
or arithmetic calculations to the holder via facsimile within one (1) Business
Day of receipt of the holder's subscription notice. If the holder and the
Company are unable to agree upon the determination of the Warrant Exercise
Price, the last reported sale price (as reported by Bloomberg) or Market Price
or arithmetic calculation of the Warrant Shares within one day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall immediately submit via facsimile (i) the disputed determination of
the Warrant Exercise Price, the last reported sale price (as reported by
5
Bloomberg) or the Market Price to an independent, reputable investment banking
firm or (ii) the disputed arithmetic calculation of the Warrant Shares to its
independent, outside accountant. The Company shall cause the investment banking
firm or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
five (5) Business Days from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any exercise
and at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised.
(c) No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock
issued upon exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) Notwithstanding anything contained herein to the contrary
and in addition to and not in lieu of any of the other rights and remedies to
which the holder may be entitled by reason of the Company's failure fully to
meet its obligations under the Securities Purchase Agreement or the Registration
Rights Agreement, the holder of this Warrant may, at its election exercised in
its sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "CASHLESS EXERCISE") :
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A=the total number shares with respect to
which this Warrant is then being exercised.
B=the last reported sale price (as reported
by Bloomberg) of the Common Stock on the date
immediately preceding the date of the subscription
notice.
C =the Warrant Exercise Price then in effect
for the applicable Warrant Shares at the time
of such exercise.
Section 3. Covenants as to Common Stock. The Company hereby covenants
and agrees as follows:
6
(a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which 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 issue thereof.
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved the number of shares of Common Stock needed to provide for the exercise
of the rights then represented by this Warrant.
(d) The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance 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 by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. No impairment of the designations, preferences and rights of the
Preferred Shares contained in the Certificate of Designation or any waiver
thereof which has an adverse effect on the rights granted hereunder shall be
given effect until the Company has taken appropriate action (satisfactory to the
holders of Preferred Share Warrants representing a majority of the shares of
Common Stock issuable upon the exercise of such Preferred Share Warrants then
outstanding) to avoid such adverse effect with respect to this Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
Section 4. Taxes. Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of Common Stock or other securities or property in a
name other than that of the registered holders of this Warrant to be converted
and such holder shall pay such amount, if any, to cover any applicable transfer
or similar tax.
7
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 5, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "ACCREDITED INVESTOR"). Upon exercise of
this Warrant, other than pursuant to a Cashless Exercise, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of this Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of this Warrant shall not violate any
United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary.
8
(b) This Warrant and the rights granted hereunder shall be
assignable by the holder hereof without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares
for resale under the Securities Act pursuant to the Registration Rights
Agreement dated June 14, 2000 by and between the Company and the Investors set
forth therein (the "REGISTRATION RIGHTS AGREEMENT"), and the initial holder of
this Warrant (and certain assignees thereof) is entitled to the registration
rights in respect of the Warrant Shares as set forth in the Registration Rights
Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of Shares.
The Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever on or after the date of issuance
of this Warrant, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock (other than shares of Common Stock deemed to
have been issued by the Company in connection with an Approved Stock Plan or
upon exercise or conversion of the Other Securities) for a consideration per
share less than a price (the "APPLICABLE PRICE") equal to the Warrant Exercise
Price in effect immediately prior to such issuance or sale, then immediately
after such issuance or sale the Warrant Exercise Price then in effect shall be
reduced to an amount equal to the product of (x) the Warrant Exercise Price in
effect immediately prior to such issuance or sale and (y) the quotient
determined by dividing (1) the sum of (I) the product of the Applicable Price
and the number of shares of Common Stock Deemed Outstanding immediately prior to
such issuance or sale, and (II) the consideration, if any, received by the
Company upon such issuance or sale, by (2) the product of (I) the Applicable
Price and (II) the number of shares of Common Stock Deemed Outstanding
immediately after such issuance or sale. Upon each such adjustment of the
Warrant Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment.
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable:
(i) Issuance of Options. If the Company in any manner
grants any Options and the lowest price per share for which one share
of Common Stock is issuable upon the exercise of any such Option or
upon conversion or exchange of any Convertible Securities issuable upon
exercise of any such Option is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or
sale of such Option for such price per share. For purposes of this
Section 8(b)(i), the "lowest price per share for which one share of
Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities "shall be equal
to the sum of the
9
lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting
or sale of the Option, upon exercise of the Option and upon conversion
or exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Warrant Exercise Price shall be
made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities. Upon the expiration or termination of any
unexercised Option, such Warrant Exercise Price shall be readjusted to
such amount as would have obtained had the adjustment made upon the
granting or issuance of such Option been made based upon the issuance
of only the number of shares of Common Stock actually issued on
exercise of such Option. Notwithstanding the foregoing, no adjustment
shall be made pursuant to this Section 8(b)(i) to the extent that such
adjustment is based solely on the fact that the Convertible Securities
issuable upon exercise of such Option are convertible into or
exchangeable for Common Stock at a price which varies with the market
price of the Common Stock.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and
the lowest price per share for which one share of Common Stock is
issuable upon such conversion or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time
of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 8(b)(ii), the "lowest price
per share for which one share of Common Stock is issuable upon such
conversion or exchange "shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with
respect to one share of Common Stock upon the issuance or sale of the
Convertible Security and upon conversion or exchange of such
Convertible Security. No further adjustment of the Warrant Exercise
Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such
issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Warrant Exercise Price had
been or are to be made pursuant to other provisions of this Section
8(b), no further adjustment of the Warrant Exercise Price shall be made
by reason of such issuance or sale. Upon the expiration of any rights
of conversion or exchange under such Convertible Securities, such
Warrant Exercise Price shall be readjusted to such amount as would have
obtained had the adjustment made upon the granting or issuance of such
Convertible Securities been made based upon the issuance of only the
number of shares of Common Stock actually issued on conversion of such
Convertible Securities. Notwithstanding the foregoing, no adjustment
shall be made pursuant to this Section 8(b)(ii) to the extent that such
adjustment is based solely on the fact that such Convertible Securities
are convertible into or exchangeable for Common Stock at a price which
varies with the market price of the Common Stock.
(iii) Change in Option Price or Rate of Conversion.
If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Warrant Exercise Price in effect at the
time of such change shall be
10
adjusted to the Warrant Exercise Price which would have been in effect
at such time had such Options or Convertible Securities provided for
such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of shares of Common Stock acquirable
hereunder shall be correspondingly readjusted. For purposes of this
Section 8(b)(iii), if the terms of any Option or Convertible Security
that was outstanding as of the date of issuance of this Warrant are
changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such change.
(c) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
If, at any time or from time to time, the number of shares of Common Stock
outstanding is increased by a stock dividend payable in shares of Common Stock
or any Convertible Securities, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such stock
dividend, a provision shall be made so that the Holder of this Warrant shall
receive upon exercise thereof in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Company that it
would have received if (A) this Warrant had been exercised into Common Stock on
the date of such event and (B) it had thereafter retained such securities and
all rights and distributions relating to them.
(d) Minimum Adjustment of Warrant Exercise Price. No
adjustment of the Warrant Exercise Price shall be made under this Section 8 in
an amount of less than 1% of the Warrant Exercise Price in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Warrant Exercise Price. No
adjustments shall be made pursuant to this Section 8 which would result in an
increase in the Warrant Exercise Price.
(e) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Warrant Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Preferred Share Warrants;
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provided that no such adjustment will increase the Warrant Exercise Price or
decrease the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 8.
(f) Notices.
(i) Immediately upon any adjustment of a Warrant
Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail, and
certifying, the calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least ten (10) days prior to the date on
which the Company closes its books or takes a record (A) with respect
to any dividend or distribution upon the Common Stock, (B) with respect
to any pro rata subscription offer to holders of Common Stock or (C)
for determining rights to vote with respect to any Organic Change (as
defined below), dissolution or liquidation, provided that such
information shall be made known to the public prior to or in
conjunction with such notice being provided to such holder. Any
recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to
another Person or other transaction in each case which is effected in
such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein
as an "ORGANIC CHANGE."
(iii) The Company will also give written notice to
the holder of this Warrant at least ten (10) days prior to the date on
which any Organic Change, dissolution or liquidation will take place,
provided that such information shall be made known to the public prior
to or in conjunction with such notice being provided to such holder.
Section 9. Redemption.
(a) On not less than thirty (30) days notice given at any time
when the registration statement covering the resale of the shares of Common
Stock issuable upon exercise of the Warrant required to be filed by the Company
pursuant to Registration Rights Agreement is effective and which shall remain
effective during such 30 day notice period, the Warrants may be redeemed, at the
option of the Company, at a redemption price of $0.10 per Warrant, provided the
Closing Sale Price of the Common Stock issuable upon exercise of this Warrant
shall equal or exceed 200% of the then Exercise Price for a period of twenty
(20) consecutive trading days ending at least three (3) days prior to the date
of the notice of redemption.
(b) If the conditions set forth in Section 9(a) are met, and
the Company elects to exercise its right to redeem the Warrants, it shall mail a
notice of redemption to each of the registered holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 12. Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the registered holder receives such notice.
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(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, and (iii) that the right to exercise
the Warrant shall terminate at 5:00 P.M. (New York time) on the business day
immediately preceding the date fixed for redemption. The date fixed for the
redemption of the Warrant shall be the "REDEMPTION DATE." No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a registered holder
(A) to whom notice was not mailed or (B) whose notice was defective. An
affidavit of the warrant agent or of the Secretary or an Assistant Secretary of
the Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, holders of the Warrants shall have no
further rights except to receive, upon surrender of the Warrant, the redemption
price.
(e) From and after the Redemption Date specified, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the registered holder thereof of one
or more Warrant Certificates evidencing Warrants to be redeemed, deliver or
cause to be delivered to or upon the written order of such Holder a sum in cash
equal to the redemption price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the redemption price, shall
cease.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party) ; or (iii) one Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
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If to the Company:
Wire One Technologies, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Telephone: (973) 282-2000
Facsimile: (973) 282-2033
Attention: President
With a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
Telephone: (212) 468-8000
Facsimile: (212) 468-7900
Attention: Michael J.W. Rennock, Esq.
If to the holder: To the address set forth above immediately below such holder's
name on the signature pages in the Securities Purchase Agreement.
Each party shall provide five days' prior written notice to the other party of
any change in address or facsimile number. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
Section 12. Date. The date of this Warrant is June 14, 2000. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
Section 13. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Preferred Share Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of Preferred Share Warrants representing a majority of
the shares of Common Stock obtainable upon exercise of the Preferred Share
Warrants then outstanding; provided that no such action may increase the Warrant
Exercise Price of the Preferred Share Warrants or decrease the number of shares
or class of stock obtainable upon exercise of any Preferred Share Warrant
without the written consent of the holder of such Preferred Share Warrant.
Section 14. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not
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constitute a part of this Warrant. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York, or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
WIRE ONE TECHNOLOGIES, INC.
By:
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Rich Reiss
President and Chief Executive Officer
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EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
WIRE ONE TECHNOLOGIES, INC.
The undersigned holder hereby exercises the right to purchase
_____________________ (_______) of the shares of Common Stock ("WARRANT SHARES")
of Wire One Technologies, Inc., a Delaware corporation (the "COMPANY"),
evidenced by the attached Warrant (the "WARRANT"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of
the Warrant Exercise Price shall be made as :
___________ a "Cash Exercise" with respect to _____________
Warrant Shares; and/or
___________ a "Cashless Exercise" with respect to ___________
Warrant Shares (to the extent permitted by the
terms of the Warrant).
2. Payment of Warrant Exercise Price. The holder shall pay the sum of
$________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
_________ Warrant Shares in accordance with the terms of the Warrant.
Date: ___________ _, ____
- ------------------------------------
Name of Registered Holder
By:
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Name:
Title:
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
___________, Federal Identification No. _____________, a warrant to purchase
____________ shares of the capital stock of Wire One Technologies, Inc., a
Delaware corporation, represented by warrant certificate no. _________, standing
in the name of the undersigned on the books of said corporation. The undersigned
does hereby irrevocably constitute and appoint ___________, attorney to transfer
the warrants of said corporation, with full power of substitution in the
premises.
Dated: ______, _____
[HOLDER]
By:
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Its:
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