EXHIBIT 4.2
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY MAY
NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANT
to Purchase Common Stock of
TERAFORCE TECHNOLOGY CORPORATION
Expiring on September 30, 2004
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, [ ] (the "Holder") is entitled to subscribe for and purchase
from the Company (as hereinafter defined), in whole or in part, [ ] shares of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (as hereinafter defined) at the Exercise Price (as hereinafter defined),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant and all rights hereunder shall expire at
5:00 p.m., Houston, Texas time, on September 30, 2004.
As used herein, the following terms shall have the meanings set forth
below:
"Company" shall mean TeraForce Technology Corporation, a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
"Common Stock" shall mean and include the Company's Common Stock, par
value $0.01 per share, authorized on the date of the original issue of this
Warrant.
"Exercise Price" shall mean $0.80 per share of Common Stock payable
upon exercise of the Warrant, as adjusted pursuant to the provisions hereof.
"Market Price" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined as follows: (x) the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers National Market on such date, or,
if there shall have been no trading on such date or if the Common Stock shall
not be listed on such system, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any NASD member firm selected from
time to time by the Company for such purpose, in each such case, unless
otherwise provided herein, averaged over a period of ten (10) consecutive
Trading Days prior to the date as of which the determination is to be made; or
(y) if the
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Common Stock shall not be listed or admitted to trading as provided in clause
(x) above, the fair market value of the Common Stock as determined in good faith
by the Board of Directors of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Trading Days" shall mean any days during the course of which the
principal securities exchange on which the Common Stock is listed or admitted to
trading is open for the exchange of securities.
"Warrant"shall mean the right upon exercise to purchase one Warrant
Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the Holder hereof upon the exercise of the Warrant.
ARTICLE I
EXERCISE OF WARRANT
I.1 Method of Exercise. The Warrant represented hereby may be exercised
by the Holder hereof, in whole or in part, at any time and from time to time on
or after the date hereof until 5:00 p.m., Houston, Texas time, on September 30,
2004. To exercise the Warrant, the Holder hereof shall deliver to the Company
(i) a written notice in the form of the Subscription Notice attached as an
exhibit hereto, stating therein the election of such Holder to exercise the
Warrant in the manner provided in the Subscription Notice; and (ii) payment in
full of the Exercise Price (A) in cash or by bank check for all Warrant Shares
purchased hereunder, or (B) if permitted pursuant to Section 1.6 below, by
notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1.6), or (C) a combination of (A) and
(B) above; and (iii) this Warrant. The Warrant shall be deemed to be exercised
on the date of receipt by the Company of the Subscription Notice, accompanied by
payment for the Warrant Shares and surrender of this Warrant, as aforesaid, and
such date is referred to herein as the "Exercise Date". Upon such exercise, the
Company shall, as promptly as practicable and in any event within ten (10)
business days, issue and deliver to such Holder a certificate or certificates
for the full number of the Warrant Shares purchased by such Holder hereunder,
and shall, unless the Warrant has expired or has been redeemed, deliver to the
Holder hereof a new Warrant representing the portion, if any, that shall not
have been exercised, in all other respects identical to this Warrant. As
permitted by applicable law, the Person in whose name the certificates for
Common Stock are to be issued shall be deemed to have become a holder of record
of such Common Stock on the Exercise Date and shall be entitled to all of the
benefits of such holder on the Exercise Date, including without limitation the
right to receive dividends and other distributions for which the record date
falls on or after the Exercise Date and to exercise voting rights.
I.2 Reservation of Shares. The Company shall reserve at all times so
long as the Warrant remains outstanding, free from preemptive rights, out of its
treasury Common Stock or its authorized but unissued
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shares of Common Stock, or both, solely for the purpose of effecting the
exercise of the Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of the Warrant.
I.3 Valid Issuance. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof.
I.4 No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If any
fraction of a share of Common Stock would be issuable on the exercise of this
Warrant, the Company shall pay an amount in cash calculated by it to be equal to
the Market Price of one share of Common Stock at the time of such exercise
multiplied by such fraction computed to the nearest whole cent.
I.5 Reimbursement Agreement. The Warrant Shares represented hereby are
issued pursuant to that certain Reimbursement Agreement, dated of even date
hereof (the "Reimbursement Agreement"), between the Company, the Holder, and the
other persons listed therein. The Holder hereof shall be entitled to
registration under the Securities Act and any applicable state securities or
blue sky laws only to the extent set forth in that certain Registration Rights
Agreement, of even date herewith, attached to the Reimbursement Agreement and
incorporated therein (the "Registration Rights Agreement"). Notwithstanding the
foregoing, in the event of any conflict between the provisions of the
Reimbursement Agreement and of this Warrant, the provisions of this Warrant
shall control.
1.6 Cashless Exercise. If (i) the Company and the Holder mutually
elect; or (ii) the Warrant Shares to be issued are not registered for resale to
the extent required by the Registration Rights Agreement, then, notwithstanding
anything to the contrary, the Holder may exercise, at its election, in its sole
discretion, this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon exercise of this
Warrant, elect instead to receive the Warrant Shares through a "cashless" or
"net-issue" exercise of the Warrant ("Cashless Exercise"). The Holder shall
exchange the Warrant subject to a Cashless Exercise for that number of Warrant
Shares determined by multiplying the number of Warrant Shares issuable hereunder
by a fraction, the numerator of which shall be the difference between (x) the
Market Price and (y) the Exercise Price for each such Warrant Share, and the
denominator of which shall be the Market Price; the Subscription Notice shall
set forth the calculation upon which the Cashless Exercise is based.
ARTICLE II
TRANSFER
II.1 Ownership of Warrant. The Company may deem and treat the Person in
whose name the Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary unless agreed to in writing by the Company.
II.2 Restrictions on Transfer of Warrants. The Holder of the Warrant
agrees that the Warrant is not transferrable without the prior written consent
of the Company and any such transfer without such consent shall be void and
without effect. Subject to the restrictions on transfer of the Warrant in this
Section 2.2, the
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Company, from time to time, shall register the transfer of the Warrant in such
books upon surrender of this Warrant at the Company's principal office, properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer satisfactory to the Company. Upon any such transfer
and upon payment by the Holder or its transferee of any applicable transfer
taxes, a new Warrant shall be issued to the transferee and the transferor (as
their respective interests may appear) and the surrendered Warrant shall be
canceled by the Company. The Holder shall pay all taxes and all other expenses
and charges payable in connection with the transfer of the Warrant pursuant to
this Section 2.2.
II.3 Compliance with Securities Laws. Notwithstanding any other
provisions contained in this Warrant, the Holder hereof understands and agrees
that the following restrictions and limitations shall be applicable to all
Warrant Shares and to all resales or other transfers thereof pursuant to the
Securities Act, and that as a condition to the exercise of such warrant that the
following are and will be true and correct:
(A) The Holder hereof agrees that the Warrant Shares shall not
be sold or otherwise transferred unless the Warrant Shares are
registered under the Securities Act and applicable state securities or
blue sky laws or are exempt therefrom.
(B) A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR UPON RECEIPT OF AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY PURSUANT TO A TRANSACTION
EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS."
(C) Stop transfer instructions will be imposed with respect to
the Warrant Shares so as to restrict resale or other transfer thereof,
subject to this Section 2.3.
(D) The Holder is an "accredited investor" within the meaning
of Rule 501 of Regulation D as promulgated under the Securities Act,
and will be so as a condition of purchasing any of the Warrant Shares.
The Holder will acquire the Warrant, and if exercised, any Warrant
Shares for its own account for investment purposes and not with a view
towards distribution. The Holder must bear the economic risk of the
investment for an indefinite period of time because the Warrant and
Warrant Shares have not been registered under the Securities Act and
therefore cannot be sold unless they are subsequently registered under
the Securities Act or an exemption from such registration is available.
The Holder has received and carefully reviewed copies of all documents
filed by the Company with the Securities and Exchange Commission as of
the date hereof, and will do so before each exercise of the Warrant. No
representations or warranties have been made to the Holder by the
Company, the
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officers or directors of the Company, or any agent, employee or
affiliate of any of them. The Holder is aware that the Warrant and any
purchase of the Warrant Shares involves a high degree of risk and that
it may sustain, and has the financial ability to sustain, the loss of
its entire investment. The Holder has had the opportunity to ask
questions of, and receive answers, satisfactory to it from the
Company's management regarding the Company. The Holder understands that
no Federal or State governmental authority has made any finding or
determination relating to the fairness of an investment in the Warrant
or Warrant Shares and that no Federal or State governmental authority
has recommended or endorsed, or will recommend or endorse, the
investment herein. The Holder, in making the decision to acquire the
Warrant, and if it is exercised, the purchase of the Warrant Shares
subscribed for, has relied upon independent investigations made by it
and has not relied on any information or representations made by third
parties. The Holder has significant assets, and upon consummation of
the purchase of the Warrant Shares, will continue to have significant
assets exclusive of the Warrant Shares. The Holder understands that the
Warrant, and if exercised, the Warrant Shares are being offered and
sold to it in reliance on specific provisions of Federal and State
securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth herein in
order to determine the applicability of such provisions. The Holder, in
making the decision to purchase the Warrant, and if exercised, the
Warrant Shares subscribed for, has relied upon independent
investigations made by it and has not relied on any information or
representations made by third parties.
ARTICLE III
ANTI-DILUTION
III.1 Anti-Dilution Provisions. If the outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Exercise
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Exercise Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Exercise Price in effect
immediately in effect prior to such adjustment, by (ii) the Exercise Price in
effect immediately after such adjustment.
III.2 Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that a holder of Common Stock of
the Company shall be entitled to receive capital stock, securities or assets
with respect to or in exchange for their shares, then as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Holder of this Warrant shall have
the right thereafter to receive upon exercise hereof the kind and amount of
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shares of stock or other securities or property which such Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case may be, such Holder
had held the number of shares of Common Stock which were the purchasable upon
the exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined in good faith by the Board of Directors of the Company)
shall be made in the application of the provisions set forth herein with respect
to the rights and interests thereafter of the Holder of this Warrant, such that
the provisions set forth herein (including provisions with respect to adjustment
of the Exercise Price) shall thereafter be applicable, as nearly as is
reasonably practicable, in relation to any shares of stock or other securities
or property thereafter deliverable upon the exercise of this Warrant.
III.3 Notice of Adjustment. Whenever the Exercise Price or the number
of Warrant Shares issuable upon the exercise of the Warrant shall be adjusted as
herein provided, or the rights of the Holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare a notice setting forth the adjusted Exercise
Price and the adjusted number of Warrant Shares issuable upon the exercise of
the Warrant or specifying the other shares of stock, securities or assets
receivable as a result of such change in rights, and showing in reasonable
detail the facts and calculations upon which such adjustments or other changes
are based. The Company shall cause to be mailed to the Holder hereof copies of
such notice stating that the Exercise Price and the number of Warrant Shares
purchasable upon exercise of the Warrant have been adjusted and setting forth
the adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable upon the exercise of the Warrant.
ARTICLE IV
MISCELLANEOUS
IV.1 Entire Agreement. This Warrant, together with the Reimbursement
Agreement and the Registration Rights Agreement, contain the entire agreement
between the Holder hereof and the Company with respect to the Warrant Shares
purchasable upon exercise hereof and the related transactions and supersedes all
prior arrangements or understandings with respect thereto.
IV.2 Governing Law; Venue. This warrant shall be governed by and
construed in accordance with the laws of the State of Texas. Venue for any
dispute arising under this Warrant shall lie in the state or federal courts of
Harris County, Texas.
IV.3 Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the Holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
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IV.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
IV.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
IV.6 Notice. Any notice or other document required or permitted to be
given or delivered to the Holder or the Company hereof shall be in writing and
will deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided a confirmation of
transmission is mechanically generated and kept on file by the sending party);
or (iii) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be: any
notice or other document required or permitted to be given or delivered to the
Company shall be sent to the offices of the Company at 1240 East Campbell Road,
Richardson, Texas 75081, Attn: Chief Executive Officer, Telecopy No. (469)
330-4972 or such other address as shall have been furnished in writing by the
Company to the Holder of this Warrant, with a copy to Michael T. Larkin, Esq.,
Bisk & Fitch, L.L.P., 24 Greenway Plaza, Suite 750, Houston, Texas 77046,
Telecopy No. (713) 871-0721. Any notice sent or required to be sent hereunder to
the Holder shall be sent to the address of the Holder as contained in the
corporate records of the Company or such other address as shall have been
furnished in writing by the Holder to the Company.
IV.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the Holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such Holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
IV.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity or such other security in such
form and amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant, the
Company will make and deliver a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other than
securities transfer taxes or income taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 4.8.
IV.9 Registration Rights. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
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4.10 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: October , 2001.
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TERAFORCE TECHNOLOGY CORPORATION
By:
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Name: Herman M. Frietsch
Title: Chairman and Chief Executive Officer
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SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
TERAFORCE TECHNOLOGY CORPORATION
The undersigned, the Holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby for and to purchase thereunder,
________ shares of the Common Stock covered by such Warrant, and hereby
represents and warrants that the representations and warranties of the Holder in
Section 2.3(D) of the Warrant are true and correct as of the date hereof.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. Form of Warrant 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
b. Cashless Exercise with respect to
________ Warrant Shares (to the
extent permitted by the terms of
the Warrant).
2. Payment of Warrant Exercise Price. In the event that the Holder has
elected a cash exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the Holder shall pay the sum of
$________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the Holder
________ certificates for such Warrant Shares in accordance with the
terms of the Warrant, to be issued in the name of
________________________________.
4. Delivery of Replacement Warrant. If such Warrant Shares shall not
include all of the Warrant Shares issuable as provided in the Warrant,
a new Warrant of like tenor and date for the balance of the Warrant
Shares issuable thereunder shall be delivered to the undersigned.
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[ ]
Date:
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ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
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Date:
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