EXHIBIT 10.5
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE STOCK PURCHASE AND
SHAREHOLDERS AGREEMENT REFERRED TO HEREIN. WITHOUT LIMITATION OF THE FOREGOING,
THE WARRANT REPRESENTED BY THIS CERTIFICATE, AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION, OR AN EXEMPTION FROM REGISTRATION,
UNDER SUCH ACTS.
No. 5 WARRANT CERTIFICATE
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THIS WARRANT CERTIFICATE (the "Warrant Certificate"), dated as of September
29, 1998, certifies that for value received Comdisco, Inc., or its assigns (the
"Holder") is the owner of a Warrant to purchase 33,000 shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of Freedom of Information,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, pursuant to a Stock Purchase Agreement dated as of September 29,
1998, by and between the Company and the Holder and certain other parties (the
"Investment Agreement"), the Holder has purchased 100,000 shares of the
Company's Series A Convertible Preferred Participating Stock, $.01 par value per
share (the "Convertible Preferred Stock"); and
WHEREAS, in consideration of the activities of the Holder in connection
with the issuance of the above-referenced Convertible Preferred Stock and
pursuant to the Investment Agreement, the Company has authorized the issuance to
the Holder of the warrant (the "Warrant") of the Company represented by this
Warrant Certificate, which Warrant entitles the Holder to purchase, upon the
terms and conditions hereinafter set forth, shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby certify as follows:
1. Grant of Warrant. This Warrant Certificate entitles the Holder to
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purchase up to 33,000 shares of Common Stock at a price per share equal to the
Exercise Price per share (as defined in Section 2(a) hereof).
2. Exercise of Warrant; Exercise Price.
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(a) Exercise Price. This Warrant Certificate shall entitle the
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Holder, subject to the provisions of Sections 2 and 3 herein, to purchase from
the Company the number of shares of Common Stock provided for in Section 1, at
the stated purchase price of One Dollar and Fifty Cents ($1.50) per share (the
"Exercise Price"), which shall be payable in full in cash at the time of
exercise of this Warrant Certificate.
(b) Right to Exercise the Warrant. This Warrant Certificate may be
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exercised, in full or in part, at any time during the period from the date
hereof through the date which is ten (10) years after the date hereof (the
"Exercise Period").
(c) Method of Exercise; Payment. The Holder may exercise this Warrant
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Certificate by executing the Form of Election attached hereto as Exhibit A and
delivering it to the Company and tendering the requisite aggregate Exercise
Price for the number of shares of Common Stock subject to this Warrant
Certificate to the Company on any business day during normal business hours (the
date of receipt of such Form of Election and aggregate Exercise Price by the
Company is hereinafter referred to as the "Exercise Date") provided, that in
lieu of tendering the requisite aggregate Exercise Price in cash, the Holder may
elect to exercise this Warrant Certificate on a net basis whereupon (i) the
number of shares of Common Stock issued upon such exercise shall be reduced by
that number of shares which have an aggregate fair market value equal to the
requisite aggregate Exercise Price and (ii) the Exercise Price shall be deemed
to have been paid and satisfied by the tender of such shares to the Company. In
addition, the Holder may pay the Exercise Price of the Warrant by surrendering
to the Company shares of the Company's Convertible Preferred Stock having an
aggregate Fair Market Value (as hereinafter defined) equal to the Exercise Price
of the Warrant being exercised, or if the Company has effected an underwritten
public offering of its Common Stock, the Holder may pay the Exercise Price of
the Warrant by surrendering to the Company shares of the Company's Common Stock
having an aggregate fair market value (based on the Current Market Price per
share (as defined in Section 2(e) hereinafter)) equal to the Exercise Price of
the Warrant being exercised. The "Fair Market Value" per share of the
Convertible Preferred Stock shall be determined on an as converted basis which
shall be equal to the higher of (i) the Current Market Price (as defined in
Section 2(e) hereinafter) of the Common Stock and (ii) the conversion value of
one dollar ($1.00) per share.
(d) Issuance of Shares of Common Stock. As soon as practicable after
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the Exercise Date the Company shall (provided that it has received the Form of
Election duly executed, accompanied by payment of the Exercise Price pursuant to
Section 2(a) hereof for each of the shares of Common Stock to be purchased)
promptly cause certificates for the number of shares of Common Stock to be
issued in respect of this Warrant Certificate to be delivered to or upon the
order of the Holder, registered in such name as may be designated by such
holder; provided that if the Common Stock is to be registered in the name of any
entity or person other than the Holder, the Company may require evidence of
compliance by the Holder with all applicable securities laws, including, without
limitation, an opinion of Holder's counsel reasonably acceptable to the Company
and the payment by the Holder of any necessary transfer taxes in connection with
the issuance of such Common Stock.
(e) Current Market Price. As used herein, "Current Market Price" per
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share of Common Stock as of any date shall mean the numerical average of the
fair market value per share of Common Stock over a period of 20 days ending on
the date immediately preceding such date. The fair market value per share of
Common Stock for any day shall mean the average of the closing prices of the
Company's Common Stock sold on all securities exchanges on which the Common
Stock may at the time be listed or as quoted on the Nasdaq National Market, or,
if there have been no sales on any such exchange or any such quotation on any
day, the average
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of the highest bid and lowest asked prices on all such exchanges or such system
at the end of such day, or, if any day the Common Stock is not so listed, the
average of the representative bid and asked prices quoted in the Nasdaq system
as of 4:00 p.m., Boston time, or, if on any day that Common Stock is not quoted
in the Nasdaq system, the average of the highest bid and lowest asked price on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization. If at any
time the Common Stock is not listed on any securities exchange or quoted in the
Nasdaq system or the over-the-counter market, the current fair market value of
Common Stock shall be the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of Common
Stock sold by the Company, from authorized but unissued shares, as determined in
good faith by the Board of Directors of the Company.
3. Reservation and Availability of Common Stock; Adjustments
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(a) Reservation of Common Stock. The Company covenants and agrees
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that it will cause to be kept available out of its authorized and unissued
Common Stock, or its authorized and issued Common Stock held in its treasury,
the number of shares of Common Stock that will be sufficient to permit the
exercise in full of this Warrant Certificate.
(b) Common Stock to be Duly Authorized and Issued, Fully Paid and Non-
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Assessable. The Company covenants and agrees that it will take all such action
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as may be necessary to ensure that all shares of Common Stock delivered upon
exercise of the Warrant and payment of the requisite aggregate Exercise Price
thereof shall, at the time of delivery of the certificates for such shares, be
duly and validly authorized and issued and fully paid and non-assessable shares.
(c) Common Stock Record Date. Each person or entity in whose name any
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certificate for shares of Common Stock is issued upon the exercise of this
Warrant Certificate in accordance with its terms shall for all purposes be
deemed to have become the holder of record of the shares of Common Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Form of Election was received by the Company and payment of the aggregate
Exercise Price was received by the Company pursuant to Section 2(a) hereof.
Prior to the exercise of this Warrant Certificate, the Holder shall not be
entitled to any rights of a stockholder of the Company with respect to the
shares of Common Stock for which this Warrant Certificate shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
(d) Adjustments to Exercise Price. The Exercise Price for this
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Warrant Certificate in effect from time to time shall be subject to adjustment
as follows:
(i) Adjustment for Common Stock Dividends, Subdivisions and
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Combinations. Upon the issuance of additional shares of Common Stock as a
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dividend or other distribution on outstanding Common Stock, the subdivision of
outstanding shares of Common Stock into a greater number of shares of Common
Stock, or the combination of outstanding shares of Common Stock into a smaller
number of shares of the Common Stock, the Exercise
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Price shall, simultaneously with the happening of such dividend, distribution,
subdivision or combination, be adjusted by multiplying the then effective
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. An adjustment made pursuant to this Section
3(d)(i) shall be given effect, upon payment of such a dividend or distribution,
as of the record date for the determination of stockholders entitled to receive
such dividend or distribution (on a retroactive basis) and in the case of a
subdivision or combination shall become effective immediately as of the
effective date thereof.
(ii) Adjustment of Number of Shares. Upon each adjustment to the
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Exercise Price pursuant to Section 3(d)(i) hereof, the number of shares of
Common Stock purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of shares purchasable
immediately prior to such adjustment by a fraction, the numerator of which shall
be the Exercise Price immediately prior to such adjustment and the denominator
of which shall be the Exercise Price immediately thereafter.
(e) Other Adjustments. In the event the Company shall make or issue,
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or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock, then and in each such event lawful
and adequate provision shall be made so that the holders of Warrants shall
receive upon exercise thereof in addition to the number of shares of Common
Stock receivable thereupon, the number of securities of the Company which such
holders would have received had such Warrants been exercised on the date of such
event and had such holders thereafter, during the period from the date of such
event to and including the date of exercise, retained such securities receivable
by such holders as aforesaid during such period, giving application to all
adjustments called for during such period under this Section 3 as applied to
such distributed securities.
If the Common Stock issuable upon the exercise of the Warrants shall be
changed into the same or different number of shares of any class or classes of
stock, whether by reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for above, or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
3), then and in each such event the holder of each Warrant shall have the right
thereafter to exercise such Warrant for the purchase of the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change, by holders of the number of
shares of Common Stock for which such Warrants might have been exercised
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(f) Mergers and Other Reorganizations. If at any time or from time to
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time there shall be a capital reorganization of the Common Stock (other than a
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 3) or a merger or consolidation of the Company with or
into another Company, then, as a part of and as a condition to the effectiveness
of such reorganization, merger, consolidation, lawful and adequate provision
shall be made so that the Holder of this Warrant shall thereafter be entitled
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to receive upon exercise the number of shares of stock or other securities or
property of the Company or of the successor Company resulting from such merger
or consolidation, to which a holder of Common Stock deliverable upon exercise
would have been entitled on such capital reorganization, merger or consolidation
if this warrant had been exercised immediately prior thereto. In any such case,
appropriate provisions shall be made with respect to the rights of the Holder of
this Warrant after the reorganization, merger or consolidation to the end that
the provisions of this Section 3 (including without limitation provisions for
adjustment of the Exercise Price and the number of shares purchasable upon
exercise) shall thereafter be applicable, as nearly as may be, with respect to
any shares of stock, securities or assets to be deliverable thereafter upon the
exercise.
4. Holder Representations, Warranties and Covenants
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The Holder represents and warrants to and covenants with the Company, as
follows:
(a) Representations. The Holder understands the risks of investing in
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computer software companies such as the Company and can afford a loss of its
entire investment. The Holder is acquiring the Warrant for investment and not
with the view to, or for resale in connection with any distribution thereof.
The Holder understands that the Warrant and the shares of Common Stock issuable
upon exercise of the Warrant are subject to restrictions on transfer under the
Investment Agreement referred to herein. The Holder understands that the
Warrant and the shares of Common Stock issuable upon exercise thereof have not
been registered under the Securities Act, of 1933 as amended (the "Securities
Act") or any applicable state securities ("blue sky") laws, by reason of
specified exemptions from the registration provisions of the Securities Act and
such laws. The Holder acknowledges that the Warrant and the shares of Common
Stock issuable upon exercise thereof must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. The Holder has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits the
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions and that such Rule may not be available for resale of the
shares. The Holder has had an opportunity to discuss the Company's business,
management and financial affairs with its management and has had the opportunity
to review the Company's facilities. The Holder has its principal place of
business in the State of Illinois.
(b) Restrictions on Transferability. Neither the Warrant, nor the
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shares of Common Stock received upon exercise thereof, shall be transferable,
except upon the conditions specified in and in accordance with the terms of the
Investment Agreement or this Section 4 hereof.
(c) Restrictive Legend. Each certificate representing shares of the
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Company's Common Stock issuable upon exercise of the Warrant, or any other
securities issued in respect of the Common Stock issued upon exercise of the
Warrant, upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend required
under applicable state securities laws):
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED
EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND (3) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A STOCK
PURCHASE AGREEMENT DATED AS OF SEPTEMBER 29, 1998, INCLUDING THEREIN CERTAIN
RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY OF THIS AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
5. Representations, Warranties and Covenants of the Company. The
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Company represents and warrants to the Holder as of the date of issuance of this
Agreement as follows:
(a) Reservation of Preferred Stock. The Common Stock issuable upon
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exercise of the Warrant has been duly and validly reserved and, when issued in
accordance with the provisions of this Warrant Certificate, will be validly
issued, fully paid and non-assessable, and will be free of any taxes, liens,
charges or encumbrances of any nature whatsoever; provided, however, that the
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Common Stock issuable pursuant to this Warrant Agreement may be subject to
restrictions on transfer under state and/or federal securities laws. The
Company has made available to the Holder true, correct and complete copies of
its charter and by-laws, as amended. The issuance of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax in respect hereof, or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock. The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of any
certificate in a name other than that of the Holder.
(b) Due Authority. The execution and delivery by the Company of this
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Warrant Certificate and the performance of all obligations of the Company
hereunder have been duly authorized by all necessary corporate action on the
part of the Company, and the execution, delivery and performance of this Warrant
Certificate do not contravene the Company's charter or by-laws or any law or
governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
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mortgage, contract or other instrument to which it is a party or by which it is
bound, and this Warrant Certificate constitutes legal, valid and binding
agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of
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notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Certificate, except for the filing of notices
pursuant to Regulation D under the Securities Act and any filing required by
applicable state securities law, which filings will be effective by the time
required thereby.
(d) Issued Securities. After giving effect to the transactions
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contemplated hereby and by the Stock Purchase Agreement between the Company and
Comdisco, Inc. dated the date hereof, the authorized capital stock of the
Company will consist of 45,000,000 shares of Common Stock, of which 13,323,119
shares will be issued and outstanding, 15,000,000 shares of Preferred Stock, of
which 11,300,000 shares will be designated as Series A Convertible Participating
Preferred Stock, of which 10,600,000 shares will be issued and outstanding, and
3,700,000 shares of Preferred Stock will be undesignated.
(e) Other Commitments to Register Securities. Except as set forth in
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this Warrant Certificate or as set forth or described in the Stock Purchase
Agreement or the exhibits thereto, the Company is not, pursuant to the terms of
any other agreement currently in existence, under any obligation to register
under the 1933 Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(f) Exempt Transaction. Subject to the accuracy of the Holder's
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representations in Section 4 hereof, the issuance of the Common Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(g) Compliance with Rule 144. At the written request of the Holder,
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if the Holder proposes to sell Common Stock issuable upon the exercise of the
Warrant in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Holder, within ten days after
receipt of such request, a written statement with respect to the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
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6. Miscellaneous
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(a) Notices. Notices or demands relating to this Warrant Certificate
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shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows, or telexed, telecopied, or delivered by
nationally-recognized overnight or other courier:
If to the Holder: Comdisco, Inc.
Legal Department
611 North River Road
Rosemont, Illinois 60018
Attention: General Counsel
Facsimile: (847) 518-5088
with a copy to: Comdisco, Inc./Comdisco Ventrues
611 North River Road
Rosemont, Illinois 60018
Attention: Venture Group
Facsimile: (847-518-5465
If to the Company: Freedom of Information, Inc.
124 Mt. Auburn Street
Suite 200N
Cambridge, MA 02138
Attention: President
Facsimile: (617) 497-5734
with a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Attention: Ann L. Milner, Esq.
Facsimile: (617) 951-7050
(b) Successors. All the covenants and provisions of this Warrant
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Certificate by or for the benefit of the Company or the Holder shall bind and
inure to the benefit of their respective successors and assigns hereunder;
provided that this Warrant Certificate may be assigned by the Holder only in
compliance with the conditions specified in and in accordance with all of the
terms of this Warrant Certificate.
(c) Governing Law. This Warrant Certificate and the Warrant, and all
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questions relating to the interpretation, construction and enforceability of
this Warrant Certificate and the Warrant, shall be governed in all respects by
the substantive laws of the Commonwealth of Massachusetts.
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(d) Amendments and Waivers. Except as otherwise provided herein, the
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provisions of this Warrant Certificate may not be amended, modified or
supplemented, other than by a written instrument executed by the Company and the
Holder.
(e) Severability. In the event that any one or more of the provisions
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contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holder
shall be enforceable to the fullest extent permitted by law.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant Certificate
to be duly executed and delivered, as of the day and year first above written.
COMPANY:
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FREEDOM OF INFORMATION, INC.
By: /s/ Stephen M. Joseph
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Name: Stephen M. Joseph
Title: Chief Financial Officer
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HOLDER:
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COMDISCO, INC.
By: /s/ James P. Labe
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Name: James P. Labe
Title: President
Comdisco Ventures Division
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EXHIBIT A
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FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to
exercise the Warrant Certificate)
To FREEDOM OF INFORMATION, INC.
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the Warrant Certificate to purchase ______________ shares of
Common Stock issuable upon the exercise of such Warrant and requests that
certificates for such shares be issued in the name of:
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(Please print name and address)
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Please insert tax payor identification number:
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Dated:
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HOLDER:
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By:
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Name:
Title:
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