EXHIBIT 4.2
THE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE
PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
October 18, 2001
LOG ON AMERICA, INC.
COMMON STOCK PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
W - ___ Warrants to Purchase 300,000 Shares of Common Stock
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Log On America, Inc., a Delaware corporation (the
"Company"), Ken Cornell is hereby granted the right to purchase, at the initial
exercise price of $.50 per share (the "Initial Exercise Price") (subject to
adjustment as provided herein) (the "Purchase Price"), at any time commencing on
the date hereof until 5:00 p.m., New York City time, for a term of five (5)
years thereafter, 300,000 shares of common stock of the Company, $.00001 par
value per share (the "Shares").
This Common Stock Purchase Warrant (each, a "Warrant") is initially
exercisable at a price of $.50 per Share, payable in cash or by certified or
official bank check in New York Clearing House funds, subject to adjustments as
provided in Section 5 hereof. Upon surrender of this Warrant, with the annexed
Subscription Form duly executed, together with payment of the Purchase Price (as
hereinafter defined) for the Shares purchased at the offices of the Company, the
registered holder of this Warrant (the "Holder") shall be entitled to receive a
certificate or certificates for the Shares so purchased.
1. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
at the option of the Holder, in whole or in part (but not as to fractional
Shares underlying this Warrant), during any period in which this Warrant may be
exercised as set forth above. In the case of the purchase of less than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver a new Warrant of like
tenor for the balance of the Shares purchasable hereunder.
(b) At any time during the term, the Holder may, at its election,
exchange this Warrant, in whole or in part (a "Warrant Exchange"), into the
number of Shares determined in accordance with this paragraph 1(b) by
surrendering this Warrant at the principal office of the Company, accompanied by
a notice stating the Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange or, if later, the
date the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant of like tenor evidencing the balance of the Shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within five (5) business days following the Exchange
Date. In connection with any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of Shares (rounded to the next
highest integer) equal to (i) the number of Shares specified by the Holder in
its Notice of Exchange (the "Total Number") less (ii) the number of Shares equal
to the quotient obtained by dividing (a) the product of the Total Number and the
then existing exercise price by (b) the closing price ("Closing Price") on the
trading date immediately preceding the Exchange Date of a share of the Company's
Common Stock as reported on NASDAQ or other national securities exchange. In the
event the Company's Common Stock is not traded on any such exchange, the Closing
Price shall be the price per share for the last sale of Common Stock by the
Company prior to the Notice of Exchange.
2. Issuance of Certificates.
Upon the exercise of this Warrant and payment in full for the
Shares, the issuance of certificates for Shares underlying this Warrant shall be
made forthwith (and in any event within five (5) business days thereafter)
without charge to the Holder, including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of Section 3 hereof) be issued in the name of, or in
such names as may be directed by, the Holder; 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 such certificates in a
name other than that of the Holder, or its affiliates or loan participants and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has
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been paid. The certificates representing the Shares underlying this Warrant
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman, Vice Chairman, President or Vice
President and Secretary or Assistant Secretary of the Company.
3. Restriction on Transfer; Registration Under the Securities Act of 1933,
as amended.
3.1 Restriction on Transfer. (a) Neither this Warrant nor any Shares
issuable upon exercise hereof has been registered under the Securities Act of
1933, as amended (the "Act"), and none of such securities may be offered, sold,
pledged, hypothecated, assigned or transferred except (i) pursuant to a
registration statement under the Act which has become effective and is current
with respect to such securities or (ii) pursuant to a specific exemption from
registration under the Act but only upon a Holder hereof first having obtained
the written opinion of counsel to the Company, or other counsel reasonably
acceptable to the Company, that the proposed disposition is consistent with all
applicable provisions of the Act as well as any applicable "Blue Sky" or similar
state securities law. Upon exercise, in part or in whole, of this Warrant, each
certificate issued representing the Shares underlying this Warrant shall bear a
legend to the foregoing effect.
(b) Notwithstanding anything contained herein to the contrary, this
Warrant and the Shares may be assigned in compliance with Section 3.1(a).
3.2 Piggyback Registration.
(i) If, at any time during the five-year period commencing on
the date hereof, the Company proposes to register any of its securities under
the Securities Act (other than in connection with the merger, acquisition or
exchange offer on Form S-4 or pursuant to Form S-8 or successor forms) it will
give written notice by regular mail and registered or certified mail, at least
thirty (30) days prior to the filing of each such registration statement, to the
Holder of its intention to do so. Upon the written request of the Holder given
within ten (10) days after receipt of any such notice of its desire to include
any Shares in such proposed registration statement, the Company shall afford the
Holder the opportunity to have any such Shares registered under such
registration statement.
(ii) Notwithstanding the provisions of this Section 3.2(b) the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 3.3(b) (irrespective of whether a written
request for inclusion of any such securities shall have been made) to elect not
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
3.3 Certain Covenants with Respect to Registration. In connection with any
registration under Sections 3.2 hereof, the Company covenants and agrees as
follows:
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(a) The Company shall use its best efforts to cause any registration
statement to be declared effective at the earliest possible time, and shall
furnish the Holder desiring to sell Warrant Securities such number of
prospectuses as shall be reasonably required.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder's counsel and any underwriting or selling commissions or other charges of
any broker-dealer acting on behalf of the Holder), fees and expenses in
connection with all registration statements filed pursuant to Sections 3.2 and
3.3 hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Shares or (the "Warrant Securities") included
in a registration statement for offering and sale under the securities or blue
sky laws of such states as reasonably are requested by the Holder, provided that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder of the Warrant Securities
to be sold pursuant to any registration statement and each person, if any, who
controls the Holder within the meaning of Section 15 of the Act or Section 20(a)
of the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all
loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or any
other statute, common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Warrant Securities under the securities laws thereof or filed with the
Securities and Exchange Commission (the "Commission"), any state securities
commission or agency, the National Association of Securities Dealers, Inc., The
Nasdaq Stock Market, Inc. or any securities exchange, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements contained therein not misleading, unless such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company by the Holder expressly for use in such registration
statement, any amendment or supplement thereto or any application, as the case
may be. If any action is brought against the Holder or any controlling person of
the Holder in respect of which indemnity may be sought against the Company
pursuant to this Section 3.4(d), the Holder or such controlling person shall
within thirty (30) days after the receipt thereby of a summons or complaint
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and payment of
reasonable fees and expenses of counsel (which counsel shall be reasonably
satisfactory to the Holder or such controlling person), but the failure to give
such notice shall not affect such indemnified person's right to indemnification
hereunder except to the extent that the Company's defense of such action was
materially adversely affected thereby. The Holder or such controlling person
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Holder or such
controlling person
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unless the employment of such counsel shall have been authorized in writing by
the Company in connection with the defense of such action, the Company shall not
have employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for the Holder and/or such controlling person shall
be borne by the Company. Except as expressly provided in the previous sentence,
in the event that the Company shall not previously have assumed the defense of
any such action or claim, the Company shall not thereafter be liable to the
Holder or such controlling person in investigating, preparing or defending any
such action or claim. The Company agrees promptly to notify the Holder of the
commencement of any litigation or proceedings against the Company or any of its
officers, directors or controlling persons in connection with the resale of the
Warrant Securities or in connection with such registration statement. The
Company further agrees that upon demand by an indemnified person, at any time or
from time to time, it will promptly reimburse such indemnified person for any
loss, claim, damage, liability, cost or expense actually and reasonably paid by
the indemnified person as to which the Company has indemnified such person
pursuant hereto. Notwithstanding the foregoing provisions of this Section
3.4(d), any such payment or reimbursement by the Company of fees, expenses or
disbursements incurred by an indemnified person in any proceeding in which a
final judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against the Holder or such indemnified
person as a direct result of the Holder's or such person's gross negligence or
willful misfeasance will be promptly repaid to the Company.
(e) The Holder of the Warrant Securities to be sold pursuant to a
registration statement, and its successors and assigns, shall severally, and not
jointly, indemnify the Company, its officers and directors and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished in writing by or on behalf of the Holder, or its successors or
assigns, for specific inclusion in such registration statement. The Holder
further agrees that upon demand by an indemnified person, at any time or from
time to time, it will promptly reimburse such indemnified person for any loss,
claim, damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Holder has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Section 3.3(e), any
such payment or reimbursement by the Holder of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against the Company or such indemnified person as a direct
result of the Company or such person's gross negligence or willful misfeasance
will be promptly repaid to the Holder.
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(f) Nothing contained in this Agreement shall be construed as
requiring the Holder to exercise its Warrant prior to the initial filing of any
registration statement or the effectiveness thereof.
(g) The Company shall furnish to the Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to the
Holder or underwriter, if any, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), and (ii) a "cold comfort"
letter dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public auditors who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
4. Price.
4.1 Initial and Adjusted Exercise Price. The Initial Exercise Price shall
be $.50 per Share. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the Initial Exercise
Price in accordance with the provisions of Section 4.3 and Section 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
Initial Exercise Price or the adjusted exercise price, depending upon the
context.
5. Adjustments of Purchase Price and Number of Shares.
The Purchase Price in effect at any time and the number of shares of
Common Stock purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events hereinafter
described.
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, or (iv) the outstanding
shares of Common Stock of the Company are at any time changed into or exchanged
for a different number or kind of shares or other security of the Company or of
another corporation through reorganization, merger, consolidation, liquidation
or recapitalization, then appropriate adjustments in the number of shares
subject to this Warrant shall be made and the Purchase Price in effect at the
time of the record date for such dividend or distribution or of the effective
date of such subdivision, combination, reclassification, reorganization, merger,
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consolidation, liquidation or recapitalization shall be proportionately adjusted
so that the Holder of this Warrant shall be entitled to receive the aggregate
number and kind of securities which, if this Warrant had been exercised by such
Holder immediately prior to such date, it would have owned upon such exercise
and been entitled to receive upon such dividend, distribution, subdivision,
combination, reclassification, reorganization, merger, consolidation,
liquidation or recapitalization. Such adjustment shall be made successively
whenever any event listed above shall occur. The issuance of a cash dividend
paid out of current earnings shall not trigger any adjustment in the Purchase
Price or in the number and kind of security purchasable upon the exercise of
this Warrant.
(b) In case the Company shall hereafter distribute without
consideration to all holders of its Common Stock evidence of its indebtedness or
assets (excluding cash dividends or distributions and dividends or distributions
referred to in Section 5(a)), or subscription rights or warrants, then in each
such case the Purchase Price in effect thereafter shall be determined by
multiplying the Purchase Price in effect immediately prior thereto, by a
fraction, the numerator of which shall be the total number of shares of Common
Stock then outstanding multiplied by the current Purchase Price, less the fair
market value (as determined by the Company's Board of Directors) of said assets,
or evidence of indebtedness so distributed or of such rights or warrants, and
the denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by the current Purchase Price. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such distribution.
(c) Whenever the Purchase Price payable upon exercise of the Warrant
is adjusted pursuant to Sections 5(a) or 5(b), the number of shares of Common
Stock purchasable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of shares of Common Stock issuable upon exercise of
this Warrant by the Purchase Price in effect on the date hereof and dividing the
product so obtained by the Purchase Price, as adjusted.
(d) For purposes of any computation respecting consideration
received pursuant to Sections 5(c), the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of Directors
of the Company (irrespective of the accounting treatment thereof),
whose determination shall be conclusive; and
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(iii) in the case of the issuance of securities convertible
into or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this Section 5 (g).
(e) No adjustment in the Purchase Price shall be required (i) in the
event of the sale of the Company's securities in a future bona fide underwritten
public offering; or (ii) unless such adjustment would require an increase or
decrease of at least one cent ($0.01) in such price; provided, however, that any
adjustments which by reason of this Section 5(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section 5 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
Purchase Price, in addition to those required by this Section 5, as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any federal income tax liability to the holders of Common Stock or securities
convertible into Common Stock.
6. Merger or Consolidation.
In case of any consolidation of the Company with, or merger of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock of the Company), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the Holder shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger by a holder of the number
of shares of Common Stock of the Company for which this Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer. The
above provisions of this Section 6 shall similarly apply to successive
consolidations or mergers.
7. Exchange and Replacement of Warrant.
This Warrant is exchangeable without expense, upon the surrender
hereof by the registered Holder at the principal executive office of the Company
for one or more new Warrants of like tenor and date representing in the
aggregate the right to purchase the same number of Shares as are purchasable
hereunder in such denominations as shall be designated by the Holder hereof at
the time of such surrender.
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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 indemnity or security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable expenses incidental
thereto, 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.
8. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated.
9. Reservation of Securities.
The Company shall at all times reserve and keep available out of its
authorized common stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon exercise of this Warrant and
payment of the Purchase Price therefor, or as provided in Section 5, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid and
nonassessable. The Shares issuable upon the exercise of this Warrant shall be
free and clear of all liens and encumbrances.
10. Notices to Warrant Holders.
Nothing contained in this Warrant shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company.
11. Successors.
All the covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
12. Headings.
The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
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13. Law Governing.
This Warrant is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, without giving effect to conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its corporate name by, and such signature to be attested to by, a duly
authorized officer and has caused its corporate seal to be affixed hereto on the
date first above written.
Log On America, Inc.
By:_______________________________
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SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase ______ Shares represented by this Warrant in accordance to the
conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
__________________________________________________
Signature
__________________________________________________
Address
__________________________________________________
Social Security Number or Taxpayer's Fed. I.D. No.
Dated:_____________
Identification Number ________________
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant).
FOR VALUE RECEIVED, _______________________ hereby sells, assigns, and
transfers unto __________ a Warrant to purchase __________ shares of Common
Stock, $_____ par value, of Log On America, Inc., a Delaware corporation (the
"Company"), and does hereby irrevocably constitute and appoint ________________
attorney to transfer such Warrant on the books of the Company, with full power
of substitution.
DATED: _________________________
_____________________________________
Signature
_____________________________________
Print Name
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