1
Exhibit 10.38
THE WARRANTS AND COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED
(THE "ACT"), AND THE WARRANTS AND COMMON STOCK ISSUABLE ON EXERCISE OF
WARRANTS MAY NOT BE SOLD UNLESS THERE IS A REGISTRATION STATEMENT IN
EFFECT COVERING THE WARRANTS AND COMMON STOCK OR THERE IS AVAILABLE AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT
Void after 5:00 P.M., New York City time, on November 14, 1999
WARRANT TO PURCHASE 90,000 SHARES OF COMMON STOCK
OF
MICROTEL INTERNATIONAL, INC.
This is to certify that, for value received, Elk International
Corporation Limited, or assigns (the "Holder" or "Holders") is entitled to
purchase, subject to the provisions of this warrant, from Microtel
International, Inc., a Delaware corporation (the "Company"), Ninety Thousand
(90,000) shares (the "Warrant Shares" or the "Shares") of the common stock, of
the Company (the "Common Stock"), at an exercise price of $2.50 per share, at
any time during until 5:00 P.M., New York City time, on November 14, 1999 (which
shall be referred to herein as the "Exercise Term"), subject to adjustment as
set forth hereinafter. This warrant, and any warrant resulting from a transfer
or subdivision of this warrant shall sometimes hereinafter be referred to as a
"Warrant." The number of shares of Common Stock to be received upon the exercise
of this Warrant and the price to be paid for a share of Common Stock may be
adjusted from time to time as set forth in Section 7 below.
2
1. EXERCISE OF WARRANT. Each Warrant shall entitle the Holder thereof
to purchase one share of Common Stock at an exercise price of $2.50 per share of
Common Stock. This Warrant may also be exercised in whole or in part at any time
or from time to time through the last day of the Exercise Term, or if such day
is a day on which banking institutions in the State of California are authorized
by law to close, then on the next succeeding day which shall not be such a day,
by presentation and surrender hereof to the Company at its principal office, or
at the office of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Purchase Price
for the number of shares specified in such form. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise and accompanied
by the appropriate payment for the Warrant Shares issuable upon such exercise,
the Holder shall be deemed to be the holder of record of such Warrant Shares,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered to the Holder. Certificates for the Warrant Shares shall be
delivered to the Holder within a reasonable time, not to
2
3
exceed five (5) business days following the exercise of this Warrant.
2. Intentionally omitted.
3. RESERVATION AND LISTING OF SHARES. The Company hereby agrees that
at all times there shall be reserved for issuance and delivery upon exercise of
this Warrant, such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
4. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. Subject to
Section (7)(h) hereof, any fraction of a share called for upon any exercise
hereof shall be cancelled.
5. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company at its office or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the Holder thereof to purchase in the aggregate the same number of shares of
Common Stock as are purchasable hereunder. Subject to Section 10 hereof, upon
surrender of this Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay the applicable transfer tax, if
any, the Company shall, without charge, execute and deliver a
3
4
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
thereof at the office of the Company or at the office of its stock transfer
agent, if any, together with a written notice signed by the Holder hereof
specifying the names and denominations in which new Warrants are to be issued.
Upon receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant, when executed and
delivered, shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder of the Company until exercise hereof.
7. REGISTRATION UNDER THE SECURITIES ACT OF 1933. If the Company at
any time proposes to register any of its securities under the Securities Act of
1933, as amended (the "1933 Act")(other than pursuant to Form S-8 or other
comparable form), the Company shall include the shares of common stock subject
to this Warrant in such registration. The Company shall
4
5
at such time give prompt written notice to the Warrantholder of its intention to
effect such registration and of the Warrantholder's rights under such proposed
registration, and upon the request of the Warrantholder delivered to the Company
within twenty (20) days after giving of such notice (which request shall specify
the number of shares of common stock intended to be disposed of by the
Warrantholder), the Company shall include such shares of common stock requested
to be included in such registration; provided, however, that if, at any time
after giving such written notice of the Company's intention to register any of
the Warrantholder's shares of common stock and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with such registration
statement, the Company may give written notice of such determination to the
Warrantholder and thereupon shall be relieved of its obligation to register such
shares of common stock (but not from its obligation to pay registration expenses
in connection therewith or to register such shares of Common Stock in a
subsequent registration).
All expenses incurred in any registration of the Warrantholder's common
stock under this Agreement shall be paid by the Company, including, without
limitation, printing expenses, fees and disbursements of counsel for the
Company, all registration and filing fees for the Warrantholder's common stock
5
6
under federal and State securities laws, and expenses of complying with the
securities or blue sky laws of any jurisdiction in which the Warrantholder
reasonably requests the registration of his common stock; provided, however, the
Company shall not be liable for (a) any discounts or commissions to any
underwriter; (b) any stock transfer taxes incurred; or (c) the fees and expenses
of counsel for the Warrantholder, provided that the Company will pay the costs
and expenses of Company counsel.
8. SUBDIVISION AND COMBINATION. In case the Company shall at any time
subdivide the outstanding shares of Common Stock, the Purchase Price shall
forthwith be proportionately increased or decreased.
(a) ADJUSTMENT IN NUMBER OF SHARES.
(i) Upon each adjustment of the Purchase Price pursuant to the
provisions of this Section (8), the number of Shares issuable upon the exercise
of each Warrant shall be adjusted to the nearest full Share by multiplying a
number equal to the Purchase Price in effect immediately prior to such
adjustment by the number of Shares issuable upon exercise of the Warrants
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
(b) RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), or in the case of any
6
7
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of all
or a substantial part of the property of the Company, the Holder shall
thereafter have the right to purchase the kind and number of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
shares of Common Stock underlying the Warrants immediately prior to any such
events at a price equal to the product of (x) the number of shares issuable upon
exercise of the Warrants and (y) the Purchase Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrants; provided,
however, that nothing contained herein shall cause the number of shares issuable
upon exercise of this Warrant to be decreased in the event of a combination of
shares upon any such reclassification, change, consolidation, merger, sale or
conveyance.
9. DEFINITION OF "COMMON STOCK." For the purpose of this Warrant, the
term "Common Stock" shall mean, in addition to
7
8
the class of stock designated as the Common Stock, $.01 par value, of the
Company on the date hereof, any class of stock resulting from successive changes
or reclassifications of the Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. If
at any time, as a result of an adjustment made pursuant to one or more of the
provisions of Section (8) hereof, the shares of stock or other securities or
property obtainable upon exercise of this Warrant shall include securities of
the Company other than shares of Common Stock or securities of another
corporation, then thereafter the amount of such other securities so obtainable
shall be subject to adjustment from time to time in a manner and upon terms as
nearly equivalent as practicable to the provisions with respect to Common Stock
contained in Section (8) hereof and all other provisions of this Warrant with
respect to common Stock shall apply on like terms to any such other shares or
other securities.
10. TRANSFER TO COMPLY WITH THE ACT. This Warrant or the Shares or any
other security issued or issuable upon exercise of this Warrant may not be sold
or otherwise disposed of except as follows:
a. to a person who, in the opinion of counsel for the Company, is
a person to whom this Warrant or Warrant Shares may legally be transferred
without registration and without the delivery of a current prospectus under the
Act with respect thereto and then only against receipt of a letter from
8
9
such person in which such person represents that he is acquiring the Warrants or
Warrant Shares for his own account for investment purposes and not with a view
to distribution, and in which such person agrees to comply with the provisions
of this Section (10) with respect to any resale or other disposition of such
securities; or
b. to any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.
11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested.
12. SUCCESSORS. All the covenants and provisions of this Warrant by or
for the benefit of the Holder shall inure to the benefit of his successors and
assigns hereunder.
13. TERMINATION. This Warrant will terminate on any earlier date when
it has been entirely exercised and all the Shares issuable upon exercise of this
Warrant have been resold to the public.
14. GOVERNING LAW. This Warrant shall be deemed to be made under the
laws of the State of California and for all purposes shall be construed in
accordance with the laws of said State.
15. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Warrant and all
attachments hereto and all incorporation by references
9
10
set forth herein, set forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
This Warrant may be amended, the Company may take any action herein prohibited
or omit to take any action herein required to be performed by it, and any breach
of any covenant, agreement, warranty or representation may be waived, only if
the Company has obtained the written consent or waiver of the Holder. No course
of dealing between or among any persons having any interest in this Warrant will
be deemed effective to modify, amend or discharge any part of this Warrant or
any rights or obligations of any person under or by reason of this Warrant.
MICROTEL INTERNATIONAL, INC.
By: /s/ Jack Talan
--------------------------------------
10