EXHIBIT 10.16
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, (II) THIS CORPORATION RECEIVES AN OPINION
OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THIS
CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION, OR (III)
THIS CORPORATION OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
No. 3 WARRANT TO PURCHASE
GRANT DATE: December 20, 1996 SHARES OF SERIES I
PREFERRED STOCK
XACTLABS CORPORATION
--------------------
SERIES I PREFERRED STOCK WARRANT CERTIFICATE
For value received, XACTLABS CORPORATION, a Washington corporation (the
"Company"), grants to Brentwood Associates VII, L.P. (the "Holder") the right,
subject to the terms of this Warrant, to purchase at any time and from time to
time during the period commencing December 20, 1996 and ending on the Expiration
Date, as defined below, at $17.00 per share (the "Basic Exercise Price"), up to
5,882 fully paid and nonassessable shares of Series I Preferred Stock of the
Company. The Basic Exercise Price and the number of shares that may be purchased
are subject to adjustment under the terms of this Warrant.
1. DEFINITIONS
As used in this Warrant, unless the context otherwise requires:
1.1 "Basic Exercise Price" means the price at which each Warrant Share may
--------------------
be purchased upon exercise of this Warrant as stated in the first sentence of
this Warrant.
1.2 "Exercise Date" means any date when this Warrant is exercised, in
-------------
whole or in part, in the manner indicated in Sections 2.1 and 2.2 hereof.
1.3 "Exercise Price" means the Basic Exercise Price; provided, however,
--------------
that if an adjustment is required under Section 7 hereof, then "Exercise Price"
means, after each such adjustment, the price at which each Warrant Share may be
purchased upon exercise of this Warrant immediately after the last such
adjustment.
1. 4 "Expiration Date" means 5:00 p.m., Seattle time, on December 20,
---------------
2001.
1.5 "Grant Date" means the date this Warrant was first granted as stated
----------
at the beginning of this Warrant.
1.6 "Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, and all rules and regulations promulgated thereunder, or any act,
rules or regulations that replace the Securities Act or any such rules and
regulations.
1.7 "Series I Stock" means the Series I Preferred Stock, without par
--------------
value, of the Company existing on the Grant Date.
1.8 "Warrant" means this Series I Stock Warrant and each subsequent
-------
Series I Stock Warrant, if any, for which this Warrant is exchanged.
1.9 "Warrant Shares" means any shares of Series I Stock or other
--------------
securities issued or subject to issuance upon exercise of this Warrant or upon
exchange of a Warrant Share for Warrant Shares of different denominations.
2. DURATION AND EXERCISE OF WARRANT
2.1 Exercise Period
Subject to the provisions of Section 7.1(d) hereof, this Warrant may be
exercised at any time after the Grant Date and on or before the Expiration Date.
After the Expiration Date, this Warrant shall become void, and all rights to
purchase Warrant Shares shall thereupon cease.
2.2 Procedure for Exercise
This Warrant may be exercised by the Holder, in whole or in part by (i)
surrendering this Warrant to the Company, (ii) tendering to the Company payment
of the Exercise Price for the Warrant Shares for which exercise is made and
(iii) executing and delivering to the Company the Exercise Form attached hereto.
Upon exercise, the Holder will be deemed to be the holder of record of the
Warrant Shares for which exercise is made, even though the transfer or registrar
books of the Company may then be closed or certificates representing such
Warrant Shares may not then be actually delivered to the Holder.
-2-
2.3 Certificates and Agreement
Within a reasonable time but no more than 30 days after exercise,
certificates for such Warrant Shares shall be delivered to the Holder, and,
unless this Warrant has expired, a Warrant representing the number of Warrant
Shares, if any, with respect to which this Warrant shall not have been
exercised, shall be issued to the Holder.
2.4 Securities Act Compliance
Unless the transfer of the Warrant Shares shall have been registered under
the Securities Act as a condition of its delivery of the certificates for the
Warrant Shares, the Company may require the Holder (including the transferee of
the Warrant Shares in whose name the Warrant Shares are to be registered) to
deliver to the Company, in writing, representations regarding the purchaser's
sophistication, investment intent, acquisition for his, her or its own account
and such other matters as are reasonable and customary for purchasers of
securities in an unregistered private offering, and the Company may place
conspicuously upon each certificate representing the Warrant Shares a legend
substantially in the following form, the terms of which are agreed to by the
Holder (including such transferee):
The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or applicable
state law, and no interest therein may be sold, distributed, assigned,
offered, pledged or otherwise transferred unless (i) there is an
effective registration statement under the Act and applicable state
securities laws covering any such transaction involving said securities,
(ii) this corporation receives an opinion of legal counsel for the holder
of these securities satisfactory to this corporation stating that such
transaction is exempt from registration, or (iii) this corporation
otherwise satisfies itself that such transaction is exempt from
registration.
2.5 Taxes
The Company covenants and agrees that it will pay when due and payable any
and all stamp or transfer taxes that may be payable in connection with the
issuance of this Warrant, or the issuance of any Warrant Shares upon the
exercise of this Warrant. The Company shall not, however, be required to pay any
tax that may be payable in respect of any subsequent transfer of this Warrant or
of the Warrant Shares.
-3-
3. VALIDITY AND RESERVATION OF WARRANT SHARES
The Company covenants that this Warrant and all shares of Series I Stock
issued upon exercise of this Warrant in accordance with the terms hereof will be
validly issued, fully paid and nonassessable. The Company agrees that as long as
this Warrant may be exercised, the Company will have authorized and reserved for
issuance upon exercise of this Warrant a sufficient number of Warrant Shares to
provide for exercise in full.
4. FRACTIONAL SHARES
No fractional Warrant Share shall be issued upon the exercise of this
Warrant. With respect to any fraction of a Warrant Share otherwise issuable upon
any such exercise, the Company shall pay to the Holder an amount in cash equal
to such fraction multiplied by the Exercise Price.
5. LIMITED RIGHTS OF HOLDER
The Holder shall not, solely by virtue of being the Holder of this Warrant,
have any of the rights of a holder of Series I Stock, either at law or in
equity, until such Warrant shall have been exercised and the Holder shall be
deemed to be the holder of record of Warrant Shares as provided in this Warrant,
at which time the person or persons in whose name or names the certificate or
certificates for Warrant Shares being purchased are to be issued shall be deemed
the holder or holders of record of such shares for all purposes.
6. EXCHANGE OR LOSS OF WARRANT
6.1 Exchange
This Warrant is exchangeable, without expense to the Holder and upon
surrender hereof to the Company, for Warrants of different denominations
entitling the Holder to purchase Warrant Shares equal in total number and
identical in type to the Warrant Shares covered by this Warrant.
6.2 Loss, Theft, Destruction or Mutilation
Upon receipt by the Company of satisfactory evidence of the loss, theft,
destruction or mutilation of this Warrant and either (in the case of loss, theft
or destruction) reasonable indemnification or (in the case of mutilation) the
surrender of this Warrant for cancellation, the Company will execute and deliver
to the Holder, without charge, a new Warrant of like denomination. Any such new
Warrant executed and delivered shall constitute an additional obligation of the
Company,
-4-
whether or not this Warrant, reportedly lost, stolen, destroyed or mutilated,
shall be at any time presented by anyone to the Company for exercise.
7. ADJUSTMENT OF EXERCISE PRICE
7.1 General
If any of the following events shall occur at any time or from time to time
prior to the exercise in full or expiration of this Warrant, the following
adjustments shall be made in the Exercise Price, with the exceptions hereinafter
provided:
(a) Recapitalization
In case the Company effects a subdivision, combination, reclassification or
other recapitalization of its outstanding shares of Series I Stock into a
greater or lesser number of shares of Series I Stock, the Exercise Price in
effect immediately after such subdivision, combination, reclassification or
other recapitalization shall be proportionately decreased or increased, as the
case may be.
(b) Stock Dividends
If the Company shall declare a dividend on its Series I Stock payable in
stock or other securities of the Company or of any other corporation to the
holders of its Series I Stock, the Holder shall, without additional cost, be
entitled to receive upon the exercise of this Warrant, in addition to the
Warrant Shares to which such Holder is otherwise entitled upon such exercise,
the number of shares of stock, or other securities that such Holder would have
been entitled to receive if such Holder had been a holder, on the record date
for such dividend, of the number of shares of Series I Stock so purchased under
this Warrant.
(c) Merger or Consolidation-No Change in Control
In case of any merger, consolidation or reorganization of the Company with
or into one or more corporations that results in holders of the Company's voting
equity securities immediately prior to such event together owning a majority
interest of the voting equity securities of the surviving corporation
immediately following such event, the Holder, upon the exercise of this Warrant
after the record date for determination of shareholders entitled thereto, shall
receive, in lieu of or in addition to any shares of Series I Stock, the
proportionate share of all stock or other securities (appropriately adjusted for
any subsequent events of the issuer of such stock or securities that are of the
kind that would cause adjustment of the Exercise Price hereunder) or other
property issued, paid or delivered for or on all the Series I Stock
-5-
as would have been allocable to the Warrant Shares so purchased under this
Warrant had this Warrant been exercised immediately prior to said record date.
(d) Merger or Consolidation--Change in Control
In case of any merger, consolidation or reorganization of the Company with
or into one or more other corporations, that results in the holders of the
Company's voting equity securities immediately prior to such event together
owning less than a majority interest of the voting securities of the surviving
corporation immediately following such event, or in case of any sale, lease,
transfer or conveyance to another corporation of all or substantially all the
assets of the Company or proposed liquidation of the Company, then in any such
event the Holder shall be given notice of such proposed action at approximately
the same time and in substantially the same manner as the holders of the Series
I Stock. The Holder may attend the meeting of the Company's shareholders at
which such action is considered and voted upon. If the proposed action is
approved according to applicable law by the shareholders of all corporations or
other entities that are parties to the proposed action, the Holder shall be so
notified in writing by the Company by registered or certified mail at least 10
days before the effectiveness thereof. Notwithstanding the period of
exercisability stated on the face of this Warrant, this Warrant shall become
forever null and void to the extent not exercised on or before 5:00 p.m.,
Pacific time, on the tenth business day following the delivery of such notice.
(e) Minimum Adjustment Not Required
Anything in this Section 7.1 to the contrary notwithstanding, the Company
shall not be required, except as hereinafter provided, to make any adjustment of
the Exercise Price in any case in which the amount by which such Exercise Price
would be increased or reduced, in accordance with the foregoing provisions,
which would be less than $.001, but in such a case, any adjustment that would
otherwise be required to be made will be carried forward and made at the time
and together with the next subsequent adjustment that, together with any and all
such adjustments so carried forward, shall amount to not less than $.001;
provided, however, that adjustments in the Exercise Price shall be required and
made in accordance with the provisions of this Section 7.1 (other than this
Section 7.1(e)) not later than such time as may be required in order to preserve
the tax-free nature of any distribution (within the meaning of Section 305 of
the United States Internal Revenue Code of 1986, as amended) to the Holder or
the holders of Series I Stock. In the event of any subdivision, combination,
reclassification or other recapitalization of shares of Series I Stock, said
amount (as theretofore decreased or increased) shall be proportionately
decreased or increased.
-6-
7.2 Number of Warrant Shares Adjusted
After any adjustment of the Exercise Price pursuant to Section 7.1 hereof,
the number of Warrant Shares issuable at the new Exercise Price shall be
adjusted to the number obtained by (i) multiplying the number of Warrant Shares
issuable upon exercise of this Warrant immediately before such adjustment by the
Exercise Price in effect immediately before such adjustment and (ii) dividing
the product so obtained by the new Exercise Price.
7.3 Notice of Adjustment
Whenever events occur requiring the Exercise Price to be adjusted, the
Company shall promptly file with its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, a certificate of its
chief financial officer showing the adjusted Exercise Price, setting forth in
reasonable detail the acts requiring such adjustment, and stating such other
facts as shall be necessary to show the manner and figures used to compute such
adjustment. Such chief financial officer's certificate shall be made available
at all reasonable times for inspection by the Holder. Promptly after each such
adjustment, the Company shall mail a copy of such certificate by certified mail
to the Holder. The Company shall endorse on any Warrant executed and delivered
by the Company a description of each adjustment, if any, under this Section 7 as
the result of events occurring before the execution and delivery of the Warrant.
If, within 45 days of the mailing of such certificate, the Holder notifies
the Company in writing of the Holder's good-faith disagreement with the adjusted
Exercise Price contained in the Company certificate, then the Company will
promptly obtain a certificate of a firm of independent certified public
accountants of recognized standing selected by the Company's Board of Directors
(who may be the regular auditors of the Company) covering the same items
required by the Company certificate. The Company will promptly mail a copy of
the accountants' certificate to the Holder of this Warrant. The certificate of
the firm of independent public accountants will be conclusive evidence of the
correctness of the computations with respect to any adjustment of the Exercise
Price.
8. NOTICES TO HOLDER
So long as this Warrant is outstanding, whenever the Company shall expect to
(i) pay any dividend or distribution upon the Series I Stock, (ii) effect any
recapitalization, merger, consolidation, reorganization, transfer, sale, lease
or conveyance as referred to in Section 7 hereof, or (iii) be involved in any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
at least 10 days
-7-
before the proposed action or any applicable record date, the Company shall give
the Holder written notice describing the proposed action and stating the date on
which (x) a record date is to be fixed for the purpose of such dividend,
distribution or right or (y) such recapitalization, merger, consolidation,
reorganization, transfer, sale, lease, conveyance, dissolution, liquidation or
winding up is to take place and when, if any date is to be fixed, the record
holders of Series I Stock shall be entitled to exchange their shares of Series I
Stock for securities or other property deliverable upon such recapitalization,
merger, consolidation, reorganization, transfer, sale, lease, conveyance,
dissolution, liquidation or winding up.
9. MISCELLANEOUS
9.1 Successors and Assigns
All the covenants and provisions of this Warrant that are by or for the
benefit of the Company or of the Holder shall bind and inure to the benefit of
their respective permitted successors and assigns hereunder. This Warrant may
not be transferred or assigned without the consent of the Company except to a
partner or shareholder of the Holders.
9.2 Notice
Notice or demand pursuant to this Warrant to be given or made by the Holder
to or on the Company shall be sufficiently given or made if sent by registered
or certified mail, postage prepaid, addressed, until another address is
designated in writing by the Company, as follows:
XactLabs Corporation
One Union Square
600 University Street, Suite 911
Seattle, WA 98101
Any notice or demand authorized by this Warrant to be given or made by the
Company to or on the Holder shall be given to the Holder by registered or
certified mail, postage prepaid, addressed at his, her or its last known address
as it shall appear on the books of the Company, until another address is
designated in writing.
9.3 Applicable Law
The validity, interpretation and performance of this Warrant shall be
governed by the laws of the State of Washington.
-8-
9.4 Headings
The Section headings herein are for convenience only and are not part of
this Warrant and shall not affect the interpretation thereof.
9.5 Amendment
The terms of this Warrant may be amended only with the written consent of
the Company and the Holder of this Warrant.
THIS SPACE LEFT INTENTIONALLY BLANK
-9-
XACTLABS CORPORATION
Dated: December 20, 1996 By: /s/ ALAN J. HIGGINSON
----------------- ---------------------
Alan J. Higginson, Chief Executive
Officer and President
-10-
EXERCISE FORM
(To be executed by the Holder in connection with the exercise of this
Warrant in whole or in part)
TO: XACTLABS CORPORATION
The undersigned (___________________________________________________________)
Please insert Social Security or other tax
identifying number of Holder
hereby irrevocably elects to exercise the right of purchase represented by the
within Warrant for, and to purchase thereunder, __________________ shares of
Series I Stock provided for therein and tenders payment herewith to the order of
XACTLABS CORPORATION in the amount of $ ___________________.
The undersigned requests that certificates for such shares of Series I Stock be
issued as follows:
Name: ______________________________________________________________________
Address:____________________________________________________________________
Deliver to:_________________________________________________________________
Address:____________________________________________________________________
and, if said number of shares of Series I Stock shall not be all the shares of
Series I Stock purchasable hereunder, that a new Warrant for the balance
remaining of the shares of Series I Stock purchasable under the within Warrant
be registered in the name of, and delivered to, the undersigned at the address
stated below.
Address:_____________________________________________________________________
Dated:_____________________, 19_____ Signature__________________________
Note: Signature must correspond with the name as written
upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatever.
-11-