WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B)
AN OPINION OF COUNSEL, IN A FORM REASONABLY SATISFACTORY TO VA SOFTWARE
CORPORATION, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
VA SOFTWARE CORPORATION
Warrant To Purchase Common Stock
Warrant No.: 1
Number of Shares: 705,883
Date of Issuance: November 6, 2003 ("Issuance Date")
VA Software Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, THE RIVERVIEW GROUP LLC, the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as defined below)
then in effect, upon surrender of this Warrant to Purchase Common Stock
(including all Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the "Warrant"), at any time or times on or after the date
hereof, but not after 11:59 P.M., New York Time, on the Expiration Date (as
defined below), Seven Hundred Five Thousand Eight Hundred Eighty Three (705,883)
fully paid nonassessable shares of Common Stock (as defined below) (the "Warrant
Shares"). Except as otherwise defined herein, capitalized terms in this Warrant
shall have the meanings set forth in Section 15. This Warrant is one of the
Warrants to Purchase Common Stock (the "SPA Warrants") issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of November 6,
2003 (the "Initial Issuance Date"), among the Company and the purchasers (the
"Purchasers") referred to therein (the "Securities Purchase Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the holder hereof on any day from and
after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit A (the
"Exercise Notice"), of such holder's election to exercise this Warrant, (ii) (A)
payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the "Aggregate Exercise Price") in cash or by wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is
being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)) and
(iii) the surrender to the Company, on or as soon as practicable following the
date the holder of this Warrant delivers the Exercise Notice to the Company, of
this Warrant (or an indemnification undertaking in form and substance reasonably
acceptable to the Company with respect to this Warrant in the case of its loss,
theft or destruction). No later than three (3) Business Days following the date
on which the Company has received each of the Exercise Notice, the Aggregate
Exercise Price (or notice of a Cashless Exercise) and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) (the "Exercise Delivery Documents"), the Company
shall instruct its transfer agent to (X) issue and deliver to the address
specified in the Exercise Notice, a certificate, registered in the name of the
holder of this Warrant or its designee, for the number of shares of Common Stock
to which the holder of this Warrant is entitled pursuant to such exercise, or
(Y) provided that the Company's transfer agent (the "Transfer Agent") is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the holder, credit such aggregate number
of shares of Common Stock to which the holder of this Warrant is entitled
pursuant to such exercise to the holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system. Upon delivery of the
Exercise Notice, this Warrant and the Aggregate Exercise Price referred to in
clause (ii)(A) above or notification to the Company of a Cashless Exercise
referred to in Section 1(d), the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised as of the date of the
Exercise Notice, irrespective of the date of delivery of this Warrant as
required by clause (iii) above or the certificates evidencing such Warrant
Shares. If the number of Warrant Shares represented by this Warrant submitted
for exercise pursuant to this Section 1(a) is greater than the number of Warrant
Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than five (5) Business Days after any exercise
and at its own expense, issue a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be rounded to the
nearest whole number. The Company shall pay any and all taxes, including without
limitation, all documentary stamp, transfer or similar taxes, or other
incidental expense that may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means $6.00, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. Subject to
Section 1(f), if the Company shall fail for any reason or for no reason to issue
to the holder, within three Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or to credit the holder's
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balance account with DTC for such number of shares of Common Stock to which the
holder is entitled upon the holder's exercise of this Warrant, the Company shall
pay as additional damages in cash to such holder on each day after such third
Business Day that the issuance of such Common Stock certificate is not timely
effected an amount equal to 0.5% of the product of (A) the sum of the number of
shares of Common Stock not issued to the holder on a timely basis and to which
the holder is entitled and (B) the Closing Sale Price of the Common Stock on the
trading day immediately preceding the last possible date which the Company could
have issued such Common Stock to the holder without violating Section 1(a). In
addition, the holder, upon written notice to the Company, may void its Exercise
Notice with respect to, and have returned, any portion of this Warrant that has
not been exercised pursuant to such Exercise Notice; provided that the voiding
of an Exercise Notice shall not affect the Company's obligations to make any
payments which have accrued prior to the date of such notice pursuant to this
Section 1(c)(i) or otherwise.
(d) Cashless Exercise. Notwithstanding anything contained herein
to the contrary, the holder of this Warrant may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
------------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Common Stock (as
reported by Bloomberg) on the date immediately
preceding the date of the Exercise Notice.
C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
(e) Disputes. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 12.
(f) Limitations on Exercises.
(i) Beneficial Ownership. The Company shall not effect the
exercise of this Warrant, and no Person (as defined below) who is a
holder of this Warrant shall have the right to exercise this Warrant,
to the extent that after giving effect
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to such exercise, such Person (together with such Person's affiliates)
would beneficially own in excess of 9.99% of the shares of the Common
Stock outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares of
Common Stock beneficially owned by such Person and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of
this Warrant with respect to which the determination of such sentence
is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of
this Warrant beneficially owned by such Person and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion
of any other securities of the Company beneficially owned by such
Person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject
to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended. For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock a holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's
most recent Form 10-Q, Form 10-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by
the Company or its Transfer Agent setting forth the number of shares of
Common Stock outstanding. For any reason at any time, upon the written
or oral request of the holder of this Warrant, the Company shall within
24 hours or by the end of the next Business Day confirm orally and in
writing to the holder of this Warrant the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the exercise
of securities of the Company, including the SPA Warrants, by the holder
of this Warrant and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.
(ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this
Warrant if the issuance of such shares of Common Stock would exceed
that number of shares of Common Stock which the Company may issue upon
exercise of this Warrant without breaching the Company's obligations
under the rules or regulations of the Principal Market (the "Exchange
Cap"), except that such limitation shall not apply in the event that
the Company obtains the approval of its shareholders as required by the
applicable rules of the Principal Market for issuances of Common Stock
in excess of such amount. Until such approval is obtained, no Purchaser
shall be issued, upon exercise of any SPA Warrants, shares of Common
Stock in an amount greater than the product of the Exchange Cap
multiplied by a fraction, the numerator of which is the total number of
shares of Common Stock underlying the SPA Warrants issued to such
Purchaser pursuant to the Securities Purchase Agreement on the Initial
Issuance Date and the denominator of which is the aggregate number of
shares of Common Stock underlying all the Warrants issued to the
Purchasers pursuant to the Securities Purchase Agreement on the Initial
Issuance Date (with respect to each Purchaser, the "Exchange Cap
Allocation"). In the event that any Purchaser shall sell or otherwise
transfer any of such Purchaser's SPA Warrants, the transferee shall be
allocated a pro rata portion of such Purchaser's
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Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the
Exchange Cap Allocation allocated to such transferee. In the event that
any holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Exchange Cap Allocation, then the
difference between such holder's Exchange Cap Allocation and the number
of shares of Common Stock actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining
holders of SPA Warrants on a pro rata basis in proportion to the shares
of Common Stock underlying the SPA Warrants then held by each such
holder. In the event that the Company is prohibited from issuing any
Warrant Shares for which an Exercise Notice has been received as a
result of the rules and regulations of the Principal Market, the
Company shall pay cash in exchange for cancellation of such Warrant
Shares, at a price per Warrant Share equal to the difference between
the Closing Sale Price and the Exercise Price as of the date of the
attempted exercise.
(g) Forced Exercise. Notwithstanding the foregoing, in the event
that at any time following the effective date of the Registration Statement
filed pursuant to Section 2(a) of the Registration Rights Agreement, the
Conditions to Cancellation of Right to Exercise Warrant (as defined below) are
satisfied, then the Company shall have the right to send a written notice to the
holder hereof on the Business Day immediately after the Measuring Period
indicating that the right of the holder to further exercise this Warrant will
terminate on the twentieth (20th) trading day (the "Warrant Cancellation Date")
following receipt of such written notice as to the Warrants for which the holder
has not delivered an Exercise Notice as of such termination date. "Conditions to
Cancellation of Right to Exercise Warrant " means the following conditions: (i)
on each day during the period beginning on the first day of the Measuring Period
(as defined below) and ending on the Warrant Cancellation Date, the Registration
Statement registering the Registrable Securities (as defined in the Registration
Rights Agreement) shall be effective and available for the sale of at least all
of the Registrable Securities required to be included in such Registration
Statement and there shall not have been any Grace Periods; (ii) on each day
during the period beginning on the Initial Issuance Date and ending on the
Warrant Cancellation Date, the Common Stock is designated for quotation on the
Principal Market and shall not have been suspended from trading on such exchange
or market (other than suspensions of not more than one day and occurring prior
to the Warrant Cancellation Date due to business announcements by the Company)
nor on each day during the period beginning on the first day of the Measuring
Period (as defined below) and ending on the Warrant Cancellation Date shall
delisting or suspension by such exchange or market been threatened or pending
either (A) in writing by such exchange or market or (B) by falling below the
minimum listing maintenance requirements of such exchange or market; (iii)
during the period beginning on the Initial Issuance Date and ending on and
including the Warrant Cancellation Date, there shall not have occurred (A) an
event that would cause the Company to be in breach of any of its
representations, warranties or covenants as if the Company had made such
representation, warranty or covenant or any such date or (B) the public
announcement of a pending, proposed or intended Organic Change, unless such
pending, proposed or intended Organic Change has been terminated, abandoned or
consummated and the Company has publicly announced such termination, abandonment
or consummation of such Organic Change; (iv) during the period beginning on the
Initial Issuance Date and ending on and including the Warrant Cancellation Date,
the Company shall have delivered unrestricted shares of Common Stock upon resale
of the
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Common Shares (as defined in the Securities Purchase Agreement) and Warrant
Shares upon exercise of the Warrants to the holders on a timely basis; (v) the
Company shall have no knowledge of any fact that would cause the Registration
Statements required pursuant to the Registration Rights Agreement not to be
effective and available for the sale of at least all of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement;
(vi) the Company otherwise shall have been in material compliance with and shall
not have breached, in any material respect, any provision, covenant,
representation or warranty of the Securities Purchase Agreement, the
Registration Rights Agreement and any of the Warrants; and (vii) the Closing
Sale Price for any 20 consecutive trading days (the "Measuring Period") is equal
to or greater than $12.00 (subject to adjustment for stock splits, stock
dividends, recapitalizations, combinations, reverse stock splits or other
similar events).
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) Upon Subdivision Or Combination Of Common Stock. If the
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time after the date of issuance
of this Warrant combines (by combination, reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares will be
proportionately decreased. Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(b) Other Considerations. All calculations under this Section 2
shall be made by the Company in good faith.
3. [Intentionally Omitted.]
4. ORGANIC CHANGE. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets to another Person or other transaction, in each case which is
effected in such a way that holders of Common Stock are entitled to receive
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Subject to Section 4(k) of the Securities
Purchase Agreement, prior to the consummation of any (i) sale of all or
substantially all of the Company's assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the Person issuing
the securities or providing the assets in such Organic Change (in each case, the
"Acquiring Entity") a written agreement to deliver to the holder of this Warrant
in exchange for this Warrant, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant.
In the event that an Acquiring Entity is directly or indirectly controlled by a
company or entity whose common stock
6
or similar equity interest is listed, designated or quoted on a securities
exchange or trading market, the holder of this Warrant may elect to treat such
Person as the Acquiring Entity for purposes of this Section 4(b). Prior to the
consummation of any other Organic Change, the Company shall be required to make
appropriate provision to ensure that the holder of this Warrant thereafter will
have the right to acquire and receive in lieu of or in addition to (as the case
may be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant including those set forth in Sections 1(e)(i)
and 1(e)(ii) of this Warrant), such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the exercise of this Warrant as of the date of
such Organic Change (without regard to any limitations on the exercise of this
Warrant including those set forth in Sections 1(e)(i) and 1(e)(ii) of this
Warrant).
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or through
any 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 of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the holder of this
Warrant. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (ii) will take
all such actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (iii) will, so long as any of the
SPA Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, 120% of the number of
shares of Common Stock as shall from time to time be necessary to effect the
exercise of the SPA Warrants then outstanding (without regard to any limitations
on exercise) in accordance with Section 3(c) of the Securities Purchase
Agreement.
6 . WARRANT HOLDER NOT DEEMED A STOCKHOLDER. No holder, solely in such
Person's capacity as a holder, of this Warrant shall be entitled to vote or
receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder hereof, solely in such Person's capacity as a holder of this
Warrant, any of the rights of a shareholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on such holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.
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7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
holder shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the holder of this Warrant a new
Warrant (in accordance with Section 7(d)), registered as the holder of this
Warrant may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the holder of this Warrant representing the
right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company
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, of any indemnification undertaking by the holder of this Warrant to
the Company in form and substance reasonably acceptable to the Company and, in
the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.
(c) Warrant Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the holder of this Warrant at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the holder of this Warrant at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.
(d) Issuance of New Warrants. Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the holder of
this Warrant which, when added to the number of shares of Common Stock
underlying the other new Warrants issued in connection with such issuance, does
not exceed the number of Warrant Shares then underlying this Warrant), (iii)
shall have an issuance date, as indicated on the face of such new Warrant, which
is the same as the Issuance Date, and (iv) shall have the same rights and
conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the holder of this Warrant with prompt written notice of all
actions taken pursuant to this Warrant, including in reasonable detail a
description of such action and the reason therefor. Without limiting the
generality of the foregoing, the Company will give written notice to the holder
of this Warrant (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grants, issues or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of
8
Common Stock or (C) for determining rights to vote with respect to any Change of
Control (as defined in the Securities Purchase Agreement), dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to such
holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of SPA
Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding; provided that no
such action may increase the exercise price of any SPA Warrant or decrease the
number of shares or class of stock obtainable upon exercise of any SPA Warrant
without the written consent of the holder of this Warrant. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the SPA Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within three Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the holder of this
Warrant. If the holder of this Warrant and the Company are unable to agree upon
such determination or calculation of the Exercise Price or the Warrant Shares
within three Business Days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within five
Business Days submit via facsimile, by courier or in person (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the holder of this Warrant or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company's
independent, outside accountant. The Company shall cause the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error. The costs and expenses of such determination shall be borne
by the party whose calculations were furthest from those of the investment bank
or accountants as the case may be as determined by such investment bank or
accountant, as the case may be.
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13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, the Securities Purchase Agreement,
the SPA Securities and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the holder of this Warrant right to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder of this Warrant and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
14. TRANSFER. Subject to compliance with any applicable securities
laws, this Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by
Section 2(f) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
"Bloomberg" means Bloomberg Financial Markets.
"Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.
"Closing Bid Price" and "Closing Sale Price" means, for any security
as of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant
10
to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
"Common Stock" means (i) the Company's common stock, par value $0.001
per share, and (ii) any capital stock into which such Common Stock shall have
been changed or any capital stock resulting from a reclassification of such
Common Stock.
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.
"Expiration Date" means the date three (3) years after the Closing
Date (as defined in the Securities Purchase Agreement) pursuant to which this
Warrant was initially issued or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
"Holiday"), the next date that is not a Holiday.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
"Principal Market" means the Nasdaq National Market or in the event
that the Company is no longer listed with the Nasdaq National Market, the market
or exchange on which the Common Stock is then listed and traded, which only may
be The New York Stock Exchange, Inc., the American Stock Exchange or The Nasdaq
SmallCap Market.
"Registration Rights Agreement" means that certain registration rights
agreement between the Company and the Purchasers.
"SPA Securities" means the shares of Common Stock issued pursuant to
the Securities Purchase Agreement.
[Signature Page Follows]
11
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.
VA SOFTWARE CORPORATION
By:
---------------------------
Name: Ali Jenab
Title: Chief Executive Officer
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
VA SOFTWARE CORPORATION
The undersigned holder hereby exercises the right to purchase _________________
of the shares of Common Stock ("Warrant Shares") of VA Software Corporation, a
Delaware corporation (the "Company"), evidenced by the attached Warrant to
Purchase Common Stock (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
_________ a "Cash Exercise" with respect to _________ Warrant Shares;
and/or
_________ a "Cashless Exercise" with respect to _________ Warrant Shares.
[Insert this paragraph (2) in the event that the holder has not elected a
Cashless Exercise in accordance with the terms of the Warrant as to all of the
Warrant Shares to be issued pursuant hereto] 2. Payment of Exercise Price. The
holder is hereby delivering to the Company payment in the amount of $_________
representing the Aggregate Exercise Price for such Warrant Shares not subject to
a Cashless Exercise in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
To the extent the foregoing exercise is for less than the full number of Warrant
Shares issuable pursuant to the Warrant, a replacement Warrant representing the
remainder of the Warrant Shares issuable (and otherwise of like form, tenor and
effect) shall be delivered to holder.
Notwithstanding anything to the contrary contained herein, this Exercise Notice
shall constitute a representation by the holder of the Warrant submitting this
Exercise Notice that, after giving effect to the exercise provided for in this
Exercise Notice, such holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person's
affiliates) of a number of shares of Common Stock which exceeds 9.99% of the
total outstanding shares of Common Stock, all as determined pursuant to the
provisions of Section 1(f)(i) of the Warrant.
Date: _______________ __, ______
________________________________
Name of Registered Holder
By:
--------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
[Transfer Agent] to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated November 6, 2003 from
the Company and acknowledged and agreed to by [Transfer Agent].
VA SOFTWARE CORPORATION
By:
---------------------------
Name:
Title: