1
Exhibit 10.5
NEITHER THE SECURITY EVIDENCED BY THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT (COLLECTIVELY, THE
"SECURITIES LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES (I) ARE
REGISTERED UNDER THE SECURITIES LAWS OR (II) ARE EXEMPT FROM REGISTRATION UNDER
THE SECURITIES LAWS AND THE COMPANY IS PROVIDED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. ___ WARRANT TO PURCHASE _______
ISSUED: NOVEMBER 27, 1996 SHARES OF SERIES D PREFERRED STOCK
HOLDER:__________________
PROGRESSIVE NETWORKS, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS IS TO CERTIFY that, for value received and subject to the terms and
conditions of this Warrant, the person whose name appears as holder above, or
such other person to whom this Warrant may be transferred pursuant to Section 6
of this Warrant (the "Holder"), is entitled, at any time before the termination
of this Warrant as provided in Section 5 (the "Exercise Period"), to subscribe
for and purchase upon exercise of this Warrant ________________________
(_____________) fully paid and nonassessable shares of Series D Preferred Stock
(the "Warrant Stock") of Progressive Networks, Inc., a Washington corporation
(the "Company"), at a price per share of $9.4125 (the "Unit Price"). In the
event, however, that pursuant to the Company's Articles of Incorporation, as
amended, an event causing conversion of the Company's Series D Preferred Stock
shall have occurred prior to the exercise of this Warrant, in whole or in part,
then this Warrant shall be exercisable for the number of shares of Common Stock
of the Company into which the Series D Preferred Stock not purchased upon any
prior exercise of the Warrant would have been so converted (and, where the
context requires, reference to "Warrant Stock" shall be deemed to include such
Common Stock).
This Warrant is subject to the following additional terms and
conditions:
1. Issuance of Warrant. This Warrant is issued in connection with
Holder's acquisition of shares of Series D Preferred Stock pursuant to the terms
of the Series D Preferred Stock Purchase Agreement dated November 19, 1996 (the
"Stock Purchase Agreement").
1
2
2. Method of Exercise.
(a) This Warrant may be exercised in whole at any time or from
time to time in part, but not as to a fractional share of Warrant Stock, by
delivering to the Company during the Exercise Period (i) the attached form of
"Election to Purchase," duly completed and executed by the Holder, (ii) this
Warrant, and (iii) payment of the Unit Price for each share of Warrant Stock for
which the Warrant is exercised in cash or by certified or official bank check
payable to the order of the Company or by wire transfer of immediately available
funds to the account of the Company. At the option of the Holder, in case of an
exercise of this Warrant other than in connection with an initial public
offering, in lieu of paying the Unit Price, the Holder may deliver Warrants to
the Company for cancellation and receive shares of Warrant Stock in accordance
with the following formula: in exchange for each share of Warrant Stock issuable
on exercise of each Warrant the Holder delivers for cancellation, such Holder
shall receive a fractional share of Warrant Stock, such fraction to have a
numerator equal to the Fair Market Value per share of Warrant Stock at such time
minus the Unit Price per share of Warrant Stock at such time, and a denominator
equal to the Fair Market Value per share of Warrant Stock at such time. If the
Holder receives notice of a proposed initial public offering of the Company or
an event described in Section 8(c)(i) through (v) below, the Holder may make
exercise of this Warrant contingent upon consummation of such transaction (and,
if such transaction is an initial public offering, upon inclusion of the Warrant
Stock as selling shareholder shares in the offering) by so electing in writing
in the Election to Purchase delivered to the Company under this Section 2.
(b) For purposes of clause (a) of this Section 2, the "Fair
Market Value" per share of the Warrant Stock means: (A) the average of the
closing prices of the Company's Common Stock as quoted by NASDAQ or listed on
any exchange, whichever is applicable, as published in the Western Edition of
The Wall Street Journal for the five (5) trading days prior to the date of the
Holder's election hereunder or (B) if applicable at the time of or in connection
with the exercise under clause (a) of this Section 2, the gross sales price of
one share of the Company's Common Stock pursuant to a registered public offering
or that amount which shareholders of the Company will receive for each share of
Common Stock pursuant to a merger, reorganization or sale of assets. If the
Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the
"Fair Market Value" of the Series D Preferred shall be the price at which a
willing buyer would buy and a willing seller would sell the Series D Preferred
on the date of exercise of the warrant as agreed to by the Holder and the
Company. If the Holder and the Company cannot agree on the Fair Market Value
within ten (10) business days of the Company's receipt of the Holder's Election
to Purchase, the Fair Market Value shall be determined by an independent
appraiser selected by the Company and reasonably acceptable to the Holder. The
cost of the appraisal shall be divided equally between the Company and the
Holder.
3. Delivery of Stock Certificates. Within three (3) days after the
exercise of this Warrant (in full or in part), the Company at its expense
(except for the payment of any applicable issue taxes) shall issue in the name
of and deliver to the Holder (a) a certificate or certificates for the number of
fully paid and nonassessable shares of Warrant Stock to which
2
3
the Holder shall be entitled upon such exercise (in such denominations of
Warrant Stock as may be requested by the Holder hereof and registered in the
name of such Holder or such other name(s) as shall be designated by such Holder,
subject to the limitations contained in Section 6), and (b) unless this Warrant
has expired, a new Warrant representing the number of shares of Warrant Stock,
if any, with respect to which this Warrant shall not have been exercised. The
Holder shall for all purposes be deemed to have become the holder of record of
such shares of Warrant Stock on the date on which this Warrant is surrendered
and payment of the Warrant Price is made (or immediately upon consummation of a
Reorganization, in the case of an exercise that is contingent upon such an
event), irrespective of the date of delivery of the certificate or certificates
representing the Warrant Stock; provided, that if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of record of such shares of
Warrant Stock at the close of business on the next succeeding date on which the
stock transfer books are open.
4. Covenants as to Warrant Stock. The Company covenants and agrees that
all shares of Warrant Stock issued pursuant to the terms of this Warrant as well
as all shares of Common Stock issuable upon conversion of the Warrant Stock
(collectively, the "Reserved Shares") will, upon their issuance, be validly
issued and outstanding, fully paid and nonassessable. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved a sufficient number of the Reserved Shares to provide for the exercise
of the rights represented by this Warrant.
5. Vesting and Termination.
(a) This Warrant is exercisable from the date of issuance until
the Termination Date (as defined in this Section 5).
(b) Upon a merger or consolidation in which the Company is not
the survivor, an acquisition of all or substantially all of the assets of the
Company, a reorganization of the Company or a liquidation of the Company
(collectively, a "Reorganization"), in connection with which the holders of the
Company's capital stock will not receive stock or any other securities of any
other entity, this Warrant shall be canceled and all rights granted hereunder
shall terminate; provided, however, that the Company shall have delivered to the
Holder notice of the Reorganization no less than twenty (20) business days
before the date scheduled for the Reorganization.
(c) If not sooner canceled pursuant to the provisions of Sections
5(b), this Warrant shall be canceled and the rights granted hereunder shall
terminate on November 27, 1998, provided, that if such date occurs during the
period (a "Lockup Period") described in Section 1.6 of the Investors' Rights
Agreement (as defined in the Stock Purchase Agreement), such date shall be
postponed until the fifteenth (15th) business day following the Lockup Period.
3
4
(d) The date of termination of this Warrant as provided in this
Section 5 shall be referred to herein as the "Termination Date."
6. Restrictions on Transfer. Neither this Warrant nor any securities
purchased upon exercise of this Warrant may be transferred unless (a) such
transfer is registered under the Securities Act and any applicable state
securities or blue sky laws, (b) the Company has received a legal opinion from
counsel and in form reasonably satisfactory to the Company to the effect that
the transfer is exempt from the prospectus delivery and registration
requirements of the Securities Act and any applicable state securities and blue
sky laws, or (c) the Company otherwise satisfies itself that such transfer is
exempt from registration.
7. Legend. A legend setting forth or referring to the above restrictions
shall be placed on this Warrant, any replacement hereof and any certificate
representing a security issued pursuant to the exercise of this Warrant and a
stop transfer restriction or order may be placed on the books of the Company and
with any transfer agent until such securities may be legally sold or otherwise
transferred.
8. Adjustment of Unit Price and Number of Shares.
(a) In case the Company shall at any time subdivide its
outstanding shares of Series D Preferred Stock into a greater number of shares,
the Unit Price in effect immediately prior to such subdivision shall be
proportionately reduced (and the number of shares of Warrant Stock for which
this Warrant shall be exercisable shall be increased in inverse proportion to
such reduction), and conversely, in case the outstanding shares of Series D
Preferred Stock of the Company shall be combined into a smaller number of
shares, the Unit Price in effect immediately prior to such combination shall be
proportionately increased (and the number of shares of Warrant Stock for which
this Warrant shall be exercisable shall be decreased in inverse proportion to
such increase).
(b) Upon any adjustment of the Unit Price and number of shares
purchasable upon the exercise of this Warrant, the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on the
books of the Company. The notice shall be signed by the Company's chief
financial officer and shall state the Unit Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of this Warrant, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
(c) If at any time or from time to time the holders of Series D
Preferred Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
(x) Preferred Stock, or any shares of stock or other
securities whether or not such securities are at any time
directly or indirectly convertible into or exchangeable for
Preferred Stock, or any rights or options to subscribe
4
5
for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution (other than by conversion under
section 5.4 of the Company's Amended and Restated Articles of
Incorporation), or
(y) any cash paid or payable otherwise than as a cash
dividend, or
(z) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff,
split-up, reclassification, combination of shares or similar
corporate rearrangement (other than shares of Preferred Stock
issued as a stock split, adjustments in respect of which shall be
covered by the terms of clause (a) above), or
if at any time:
(i) the Company shall declare any cash dividend upon its
Series D Preferred Stock;
(ii) the Company shall declare any dividend upon its
Series D Preferred Stock payable in stock or make any special
dividend or other distribution to the holders of its Series D
Preferred Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of its Series D Preferred Stock any additional shares
of stock of any class or other rights;
(iv) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation;
(v) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(vi) the Company shall take or propose to take any other
action, notice of which is actually provided to holders of the
Series D Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (A) at least twenty (20) days
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such events listed in this section 8(c) above or
for determining rights to vote (if applicable) in respect of any such events
listed above in this section 8(c), and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action, at least twenty (20) days written
notice of the date when the same shall take place. Any notice given in
accordance with the foregoing clause (A) shall also specify, in the case
5
6
of any such dividend, distribution or subscription rights, the date on which the
holders of Series D Preferred Stock shall be entitled thereto. Any notice given
in accordance with the foregoing clause (B) shall also specify the date on which
the holders of Series D Preferred Stock shall be entitled to exchange their
Series D Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action as the case may be.
(d) If the change in the outstanding Series D Preferred Stock of
the Company or any other event occurs as to which the other provisions of this
Section 8 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with the
essential intent and principles of such provisions, then the Board of Directors
of the Company shall make an adjustment in the number and class of shares
available under the Warrant, the Unit Price and/or the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid. The adjustment shall be such as will
give the Holder of the Warrant upon exercise for the same aggregate Unit Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
9. Consolidation or Merger of the Company. If the Company is a party to
(a) any consolidation or merger with another corporation in which the Company is
not the survivor, (b) any consolidation or merger of another entity into the
Company in which the Company is the survivor but, in connection therewith, the
Company's equity securities are changed into or exchanged for stock or other
securities of any other entity, or (c) any capital reorganization or
reclassification of its Series D Preferred Stock or Common Stock, pursuant to
any of which transactions the holders of the Company's capital stock are
entitled to receive with respect to or in exchange for such capital stock, stock
or other securities, whether alone or together with any other consideration (all
such consideration being the "Allowed Consideration"), then, as a condition of
such transaction, lawful and adequate provisions shall be made whereby the
Holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of the Warrant Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such Allowed Consideration as may be issued or payable with respect to or in
exchange for the number of shares of such Warrant Stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In any such case, appropriate provisions shall be made with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Unit Price and the number of shares purchasable and receivable upon the
exercise of this Warrant) shall thereafter be applicable, as nearly as may be
reasonably practicable (as determined in the good faith of the Company), in
relation to the Allowed Consideration thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation or merger unless,
prior to the consummation thereof, the successor corporation resulting from such
consolidation or merger shall assume by written instrument, executed and mailed
or delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such
6
7
Allowed Consideration as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
10. Issue Tax. The issuance of certificates for shares of Preferred
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax in respect thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Holder of the Warrant being exercised.
11. Closing of Books. The Company will at no time close its transfer
books against the transfer of any Warrant or of any shares of Series D Preferred
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
12. Holder as Owner. The Company may deem and treat the holder of record
of this Warrant as the absolute owner hereof for all purposes regardless of any
notice to the contrary.
13. No Rights as Shareholder. This Warrant shall not entitle the Holder
to any voting rights or to any other rights as a shareholder of the Company or
to any other rights whatsoever except the rights stated herein; and no cash
dividend or interest shall be payable or shall accrue in respect of this Warrant
or the Warrant Stock purchasable hereunder unless, until and to the extent that
this Warrant shall be exercised. No provisions hereof, in the absence of
affirmative action by the Holder to purchase shares of Preferred Stock, and no
mere enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder for the Unit Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by its
creditors.
14. Construction. The validity and interpretation of the terms and
provisions of this Warrant shall be governed by the laws of the State of
Washington. The descriptive headings of the several sections of this Warrant are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions thereof.
15. Expiration. This Warrant shall be void and all rights represented
hereby shall cease unless exercised on or before the Termination Date. All
restrictions set forth herein on the shares of capital stock issued upon
exercise of any rights hereunder shall survive such exercise and expiration of
the rights granted hereunder.
16. Exchange of Warrant. This Warrant is exchangeable upon the surrender
hereof by the Holder at the office of the Company for new Warrants of like tenor
but of different denominations representing in the aggregate the rights to
subscribe for and purchase the number of shares that may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by the
Holder at the time of such surrender.
7
8
17. Lost Warrant Certificate. If this Warrant is lost, stolen, mutilated
or destroyed, the Company shall issue a new Warrant of like denomination, tenor
and date as this Warrant, subject to the Company's right to require the Holder
to give the Company a bond or other satisfactory security sufficient to
indemnify the Company against any claim that may be made against it (including
any expense or liability) on account of the alleged loss, theft, mutilation or
destruction of this Warrant or the issuance of such new Warrant.
18. Waivers and Amendments. This Warrant or any provision hereof may be
changed, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
19. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by United States mail
first-class postage prepaid, or by registered or certified mail with return
receipt requested, addressed as follows:
If to the Holder:
To the address last furnished in writing to the Company by the
Holder.
If to the Company:
Progressive Networks, Inc.
1111 Third Avenue, Suite 500
Seattle, Washington 98101
Attention: President
Each of the foregoing parties shall be entitled to specify a different
address by giving five (5) days' advance written notice as aforesaid to the
other party.
20. Registration Rights. The Holder shall be entitled to registration
rights with respect to the shares of Common Stock issuable upon conversion of
the Warrant Stock to the extent provided in, and subject to the terms and
conditions of, the Investors' Rights Agreement.
21. Investment Intent. By accepting this Warrant, the Holder represents
that he, she or it is acquiring this Warrant for investment and not with a view
to, or for sale in connection with, any distribution thereof.
8
9
IN WITNESS WHEREOF, the Company has executed this certificate as of the
date first written above.
Progressive Networks, Inc.
By
---------------------------------
Its
-----------------------------
9
10
ELECTION TO PURCHASE
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant (the "Owner")
irrevocably exercises this Warrant for __________ shares of Series D Preferred
Stock of Progressive Networks, Inc. (the "Exercise Shares"), on the terms and
conditions specified in this Warrant, and requests that a certificate for the
Exercise Shares hereby purchased (and any securities or other property issuable
upon such exercise) be issued in the name of and delivered to
______________________________ whose address is
______________________________________, and, if such shares shall not include
all of the shares for which this Warrant is exercisable, that a new Warrant of
like tenor and date for the balance of the shares issuable hereunder (properly
reduced to reflect cashless exercise, if applicable) be delivered to the
undersigned.
The Owner wishes to utilize cashless exercise in payment of the exercise
price for the Exercise Shares and hereby authorizes the Company to adjust the
number of shares for which this Warrant may be exercised in the future to
properly reflect such cashless exercise:
[ ] Yes, for __________ shares [ ] No
Dated: ____________________
-----------------------------------
Signature of Registered Owner
Title:
------------------------------
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
10