THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF OR IN ACCORDANCE
WITH APPLICABLE LAW.
WARRANT TO PURCHASE STOCK
Corporation: SYSVIEW TECHNOLOGY, INC.
Number of Shares: 325,000, subject to adjustment
Class of Stock: Common
Initial Exercise Price: $0.60 per Share
Issue Date: September 27, 2007
Expiration Date: September 26, 2012
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00
and for other good and valuable consideration, MONTAGE CAPITAL, LLC or
registered assignee ("Holder") is entitled to purchase the number of fully paid
and nonassessable shares (the "Shares") of Common Stock of SYSVIEW TECHNOLOGY,
INC. (the "Company"), in the number, at the price, and for the term specified
above. The exercise price per share (the "Warrant Price") is equal to $0.60 per
Share. If Company sells or issues its equity securities within one year after
the Issue Date in an offering in which the Company receives gross proceeds of at
least $1,000,000 (an "Equity Event") then, at the option of Holder, the Shares
shall be of the type and series of stock issued in the Equity Event, the Warrant
Price shall be equal to the price per share paid in the Equity Event, and Holder
shall have the rights given to the purchasers in the Equity Event. Upon the
occurrence of an Event of Default under the Loan and Security Agreement of even
date (the "Loan Agreement"), Holder may acquire Shares under this Warrant equal
to 13,750 Shares on the date of such occurrence and an additional 13,750 on the
first day of each thirty (30) day period after such Event of Default until all
amounts under the Loan Agreement have been paid in full.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3. such conversion may be made by delivering
this Warrant and a duly executed notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company
1.3 Fair Market Value. If the Shares are traded regularly in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1
1.5 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Certificate of
Incorporation upon the closing of a registered public offering of the Company's
common stock. Upon the closing of any sale, license, or other disposition of all
or substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction, the successor entity shall assume the obligations of this
Warrant, and this Warrant thereafter shall be exercisable for the same
securities, cash, and property as would be payable for the Shares issuable upon
exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing. The
Warrant Price shall be adjusted accordingly. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Weighted Average Adjustment. If the Company issues additional
common shares (including shares of common stock ultimately issuable upon
conversion of a security convertible into common stock) after the date of the
Warrant and the consideration per additional common share is less than the
Warrant Price in effect immediately before such issue, then the applicable
Warrant Price shall be reduced, concurrently with such Issue, to a price
determined by multiplying the Warrant Price by a fraction:
(a) the numerator of which is the amount of common stock
outstanding immediately before such Issue plus the amount of common stock that
the aggregate consideration received by the Company for the additional common
shares would purchase at the Warrant Price in effect immediately before such
Issue, and
(b) the denominator of which is the amount of common stock
outstanding immediately before such issue plus the number of such additional
common shares.
Upon each adjustment of the Warrant Price, the number of Shares issuable upon
exercise of the Warrant shall be increased to equal the quotient obtained by
dividing (a) the product resulting from multiplying (i) the number of Shares
issuable upon exercise of the Warrant and (ii) the Warrant Price, in each case
as in effect immediately before such adjustment, by (b) the adjusted Warrant
Price.
2
2.5 No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price,
the Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than the fair market value of the Shares as of the
date of this Warrant.
(b) All Shares that may be issued upon the exercise of the
purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
(c) The capitalization table attached hereto correctly sets
forth the authorized, issued and outstanding shares of capital stock of the
Company and all options to acquire any such shares.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (a) and (b) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Registration Rights. Within 120 days of the Issue Date (the "Filing
Date"), Company shall file a registration statement covering the resale of the
Shares on a registration statement (the "Registration Statement") with the
Securities Exchange Commission (the "SEC") and effect the registration,
qualifications or compliances (including without limitation the execution of any
required undertaking to file post-effective amendments, appropriate
qualifications or exemptions under applicable blue sky or other state securities
laws and appropriate compliance with applicable laws) as promptly as possible
after the filing thereof, but in any case within 45 days after the Filing. The
Registration Statement will be on Form SB-2, provided that if Form SB-2 is not
available for use by Company on the Filing Date, then the Registration Statement
3
will be on such form as is then available. All expenses incurred in connection
with any registration, qualification, exemption or compliance pursuant to this
Section shall be borne by Company. From the Filing Date through the earlier of
(i) the date that Holder sells or disposes of the Shares or (ii) receives
payment for the Equity Buyout under Section 4 (the "Registration Period"),
Company shall cause the registration and any qualification, exemption or
compliance under state and federal laws continuously effect with respect to
Holder, and keep such Registration Statement free of any material misstatements
or omissions. During the Registration Period, Company shall advise Holder (a)
within 2 Business Days when the Registration Statement or any amendment thereto
has been filed and when the Registration Statement or amendment has become
effective, (b) within 2 Business Days of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement, and (c) within
2 Business Days of the occurrence of any event that requires the making of any
changes in the Registration Statement. Company shall at all times use its best
efforts to cause its common stock to be listed on each securities exchange or
market on which the stock is listed as of the Issue Date. The Shares, or the
common stock into which the Shares are convertible, shall be "Registrable
Securities", and Holder shall have the rights of a "Holder" under such investor
rights agreement or registration rights agreement as the Company may enter into
from time to time. If the Registration Statement (i) has not been filed with the
SEC by the Filing Date, (ii) has not been declared effective by the SEC within
45 days thereafter, or (iii) after the Registration Statement is declared
effective by the SEC, is suspended by Company or ceases to remain continuously
effective as to all Shares for which it is required to be effective (a
"Registration Default"), for any 30-day period (a "Penalty Period") during which
the Registration Default remains uncured, Holder may acquire an additional
number of Shares equal to 27,500 shares for each Penalty Period.
3.4 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) within ninety
(90) days after the end of each fiscal year of the Company, the annual audited
financial statements of the Company certified by independent public accountants
of recognized standing and (b) within forty-five (45) days after the end of each
of the first three quarters of each fiscal year, the Company's quarterly,
unaudited financial statements; provided that so long as the Company is subject
to the reporting requrements of Section 13(a) or 15(d0 of the Securities
Exchange Act of 1934, as amended, such financial statements shall not be
delivered to Holder before such financial statements are filed with the SEC.
ARTICLE 4. EQUITY BUYOUT. At the option of Holder at any time after Holder makes
the Advance under the Loan Agreement, Holder may require that Company purchase
this Warrant for a price equal to $125,000. If any amount is outstanding under
the Loan Agreement after February 28, 2008, such price shall be $175,000.
ARTICLE 5. MISCELLANEOUS.
5.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth above.
5.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR IN
ACCORDANCE WITH APPLICABLE LAW.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee.
5.4 Transfer Procedure. Subject to the provisions of Section 5.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable),
provided that no such notice shall be required for a transfer to an affiliate of
Holder.
4
5.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
5.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
SYSVIEW TECHNOLOGY, INC.
By:
Name:
Title:
5
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ______________ shares of
the Common Stock of SYSVIEW TECHNOLOGY, INC. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to ______________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
Montage Capital, LLC
====================
Or Registered Assignee
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
MONTAGE CAPITAL, LLC or Registered Assignee
(Signature)
(Date)
6