EXHIBIT 4.5
EXHIBIT C
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT 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 APPLICABLE STATE SECURITIES LAWS OR (B)
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 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. ANY TRANSFEREE OF THIS
WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF THIS WARRANT, INCLUDING SECTION
2(f) HEREOF. THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE
NUMBER SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(f) HEREOF.
INFINITY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.:___________ Number of Shares: _______
Date of Issuance: ______, 2005
Infinity, Inc., a Colorado corporation (the "COMPANY"), hereby certifies that,
for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant (if required by Section 2(f)), 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 herein) ________________ ( ) [INSERT <115% WARRANTS>
THE QUOTIENT OF (I) 28% OF THE ORIGINAL PRINCIPAL AMOUNT OF NOTES PURCHASED BY
THE HOLDER AT THE APPLICABLE CLOSING, DIVIDED BY (II) THE WARRANT EXERCISE PRICE
AS OF THE APPLICABLE CLOSING; <140% WARRANTS> THE QUOTIENT OF (I) 27% OF THE
ORIGINAL PRINCIPAL AMOUNT OF NOTES PURCHASED BY THE HOLDER AT THE APPLICABLE
CLOSING, DIVIDED BY (II) THE WARRANT EXERCISE PRICE AS OF THE APPLICABLE
CLOSING] fully paid nonassessable shares of Common Stock (as defined in Section
1(b)) of the Company (the "WARRANT SHARES") at the Warrant Exercise Price (as
defined in Section 1(b) below); provided, however, that in no event shall the
holder be entitled or required to exercise this Warrant for a number of Warrant
Shares in excess of that number of Warrant Shares that, upon giving effect to
such exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder 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 proviso
is being made, but shall exclude shares of Common Stock that would be issuable
upon (i) exercise of the remaining, unexercised SPA Warrants (as defined in
Section 1(a)) beneficially owned by the holder and its affiliates and (ii)
exercise, conversion or exchange of the unexercised, unconverted or unexchanged
portion of any other securities of the Company beneficially owned by the holder
and its affiliates (including the Notes (as defined below) and any other
convertible notes or preferred stock) subject to a limitation on conversion,
exercise or exchange 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 or Form 10-K, 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.
Upon the written request of any holder, the Company shall promptly, but in no
event later than one (1) Business Day following the receipt of such request,
confirm in writing to any such holder 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 conversion, exercise or exchange of
securities of the Company, including the Notes, and the SPA Warrants by such
holder and its affiliates, since the date as of which such number of outstanding
shares of Common Stock was reported. For purposes of determining the maximum
number of shares of Common Stock that the Company may issue to the holder of
this Warrant upon exercise of this Warrant, such holder's delivery of an
Exercise Notice (as defined in Section 2(a)) with respect to such exercise shall
constitute a representation (on which the Company may rely without
investigation) by the holder of this Warrant that upon the issuance of the
shares of Common Stock to be issued to such holder, the shares of Common Stock
beneficially owned by such holder and its affiliates shall not exceed 4.99% of
the total outstanding shares of Common Stock of the Company immediately after
giving effect to such exercise as determined in accordance with this paragraph.
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
warrants issued pursuant to Section 1 of that certain Securities Purchase
Agreement dated as of January 13, 2005, among the Company and the Persons (as
defined below) referred to therein (as such agreement may be amended from time
to time as provided in such agreement, the "SECURITIES PURCHASE AGREEMENT") or
of any warrants issued in exchange or substitution therefor or replacement
thereof (all such warrants being collectively referred to as the "SPA
WARRANTS"). Each capitalized term used, and not otherwise defined herein, shall
have the meaning ascribed thereto in the Securities Purchase Agreement.
(b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
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(i) "APPROVED STOCK PLAN" means any employee benefit plan
that has been approved by the Board of Directors and shareholders of the
Company, pursuant to which the Company's securities may be issued to any
consultant, employee, officer or director for services provided to the Company.
(ii) "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.
(iii) "COMMON STOCK" means (i) the Company's common stock,
$0.0001 par value 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.
(iv) <140% WARRANTS> "COMMON STOCK DEEMED OUTSTANDING" MEANS,
AT ANY GIVEN TIME, THE NUMBER OF SHARES OF COMMON STOCK ACTUALLY OUTSTANDING AT
SUCH TIME, PLUS THE NUMBER OF SHARES OF COMMON STOCK DEEMED TO BE OUTSTANDING
PURSUANT TO SECTIONS 8(B)(I) AND 8(B)(II) HEREOF REGARDLESS OF WHETHER THE
OPTIONS OR CONVERTIBLE SECURITIES ARE ACTUALLY EXERCISABLE OR CONVERTIBLE AT
SUCH TIME, BUT EXCLUDING ANY SHARES OF COMMON STOCK OWNED OR HELD BY OR FOR THE
ACCOUNT OF THE COMPANY OR ISSUABLE UPON CONVERSION OF THE NOTES OR EXERCISE OF
THE SPA WARRANTS. <115% WARRANTS> INTENTIONALLY OMITTED]
(v) "CONVERTIBLE SECURITY" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable or
exercisable for Common Stock.
(vi) "EXPIRATION DATE" means the date that is five (5) years
after the Warrant Date (as defined in Section 13) or, if such date does not fall
on a Business Day, then the next Business Day.
(vii) "NOTES" means the senior secured notes of the Company
issued pursuant to the Securities Purchase Agreement, and all notes issued in
exchange therefor or replacement thereof pursuant to the terms of such notes.
(viii) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(ix) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization or a government or any department or agency thereof
or any other legal entity.
(x) "PRINCIPAL MARKET" means, with respect to the Common
Stock or any other security, the NASDAQ National Market, or, if the Common Stock
or such other security is not traded on the NASDAQ National Market, then the
principal securities exchange or trading market for the Common Stock or such
other security.
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(xi) "REGISTRATION RIGHTS AGREEMENT" means that agreement
dated January 13, 2005 by and among the Company and the Persons referred to
therein, as such agreement may be amended from time to time as provided in such
agreement.
(xii) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(xiii) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market; provided that "Trading Day" shall not include
any day on which the Common Stock is scheduled to trade, or actually trades, on
such exchange or market for less than 4.5 hours.
(xiv) "WARRANT" means this Warrant and all Warrants issued in
exchange, transfer or replacement thereof pursuant to the terms of this Warrant.
(xv) "WARRANT EXERCISE PRICE" shall be equal to, with respect
to any Warrant Share, [INSERT <115% WARRANTS> 115% OF THE ARITHMETIC AVERAGE OF
THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK ON EACH OF THE FIVE CONSECUTIVE
TRADING DAYS IMMEDIATELY PRECEDING THE WARRANT DATE; <140% WARRANTS> 140% OF THE
ARITHMETIC AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK ON EACH OF
THE FIVE CONSECUTIVE TRADING DAYS IMMEDIATELY PRECEDING THE WARRANT DATE],
subject to adjustment as hereinafter provided.
(xvi) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on its
Principal Market during the period beginning at 9:30 a.m., New York City Time
(or such other time as the Principal Market publicly announces is the official
open of trading), and ending at 4:00 p.m., New York City Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg Financial Markets (or any successor thereto,
"BLOOMBERG") through its "Volume at Price" functions, or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30 a.m., New York City Time (or such other time
as such over-the-counter market publicly announces is the official open of
trading), and ending at 4:00 p.m., New York City Time (or such other time as
such over-the-counter market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for
such security on such date on any of the foregoing bases, the Weighted Average
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holder of this Warrant. If the Company and the
holder of this Warrant are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved pursuant to Section 2(a)
below. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during any
period during which the Weighted Average Price is being determined.
Section 2. Exercise of Warrant.
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(a) Subject to the terms and conditions hereof, this Warrant may
be exercised by the holder hereof then registered on the books of the Company,
in whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. New York Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription form attached as Exhibit A hereto (the "EXERCISE NOTICE"), of such
holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "AGGREGATE EXERCISE
PRICE") by wire transfer of immediately available funds (or by check if the
Company has not provided the holder of this Warrant with wire transfer
instructions for such payment) or (B) by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in Section 2(e)),
and (iii) if required by Section 2(f) or unless the Holder has previously
delivered this Warrant to the Company and it or a new replacement Warrant has
not yet been delivered to the Holder, the surrender to a common carrier for
overnight delivery to the Company as soon as practicable following such date,
this Warrant (or an indemnification undertaking with respect to this Warrant in
the case of its loss, theft or destruction); provided, that if such Warrant
Shares are to be issued in any name other than that of the registered holder of
this Warrant, such issuance shall be deemed a transfer and the provisions of
Section 7 shall be applicable. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), the Company
shall on the second (2nd) Business Day (the "WARRANT SHARE DELIVERY DATE")
following the date of its receipt of the later of the Exercise Notice, the
Aggregate Exercise Price (or notice of Cashless Exercise) and if required by
Section 2(f) (or unless the holder of this Warrant has previously delivered this
Warrant to the Company and it or a new replacement Warrant has not yet been
delivered to the holder), this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction) (the
"EXERCISE DELIVERY DOCUMENTS"), (A) provided that the transfer agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program and provided that the holder is eligible to receive shares
through DTC, credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system or (B) issue and
deliver to the address specified in the Exercise Notice, a certificate,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled. Upon the later of the
date of delivery of (x) the Exercise Notice and (y) the Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a Cashless
Exercise referred to in Section 2(e), the holder of this Warrant shall be deemed
for all purposes to have become the holder of record of the Warrant Shares with
respect to which this Warrant has been exercised (the date thereof being
referred to as the "DEEMED ISSUANCE DATE"), irrespective of the date of delivery
of this Warrant as required by clause (iii) above or the certificates evidencing
such Warrant Shares. In the case of a dispute as to the determination of the
Warrant Exercise Price, the Weighted Average Price of a security or the
arithmetic calculation of the number of Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic calculations
to the holder via facsimile within two (2) Business Days of receipt of the
holder's Exercise Notice. If the holder and the Company are unable to agree upon
the determination of the Warrant Exercise Price, the Weighted Average Price or
arithmetic calculation of the number of Warrant Shares within one
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(1) Business Day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall promptly submit via facsimile
(i) the disputed determination of the Warrant Exercise Price or the Weighted
Average Price to an independent, reputable investment banking firm agreed to by
the Company and the holder of this Warrant or (ii) the disputed arithmetic
calculation of the number of Warrant Shares to its independent, outside public
accountant. The Company shall direct the investment banking firm 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 two (2)
Business Days after the date it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent demonstrable
error.
(b) If this Warrant is submitted for exercise, as may be required
by Section 2(f), and unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than four (4) Business Days after receipt of
this Warrant (the "WARRANT DELIVERY DATE") and at its own expense, issue a new
Warrant identical in all respects to this Warrant except it shall represent
rights 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 such Warrant is exercised (together with, in the case of a cashless
exercise, the number of Warrant Shares surrendered in lieu of payment of the
Exercise Price).
(c) 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 issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number (with 0.5 rounded up).
(d) Subject to the last sentence of Section 6 of this Warrant, if
the Company shall fail for any reason or for no reason (x) to issue and deliver
to the holder of this Warrant within three (3) 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 (taking into account the limitations on
the exercise of this Warrant set forth in the first paragraph of this Warrant)
or to credit the holder's balance account with DTC for such number of shares of
Common Stock to which the holder is entitled (taking into account the
limitations on the exercise of this Warrant set forth in the first paragraph of
this Warrant) upon the holder's exercise of this Warrant or (y) to issue and
deliver to the holder on the Warrant Delivery Date a new Warrant for the number
of shares of Common Stock to which such holder is entitled (taking into account
the limitations on the exercise of this Warrant set forth in the first paragraph
of this Warrant) pursuant to Section 2(b) hereof, if any, then the Company
shall, in addition to any other remedies under this Warrant or the Securities
Purchase Agreement or otherwise available to such holder, including any
indemnification under Section 8 of the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day after such third (3rd)
Business Day that such shares of Common Stock are not issued and delivered to
the holder, in the case of clause (x) above, or such fourth (4th) Business Day
that such Warrant is not delivered, in the case of clause (y) above, in an
amount equal to the sum of (i) in the case of the failure to deliver Common
Stock, 0.5% of the product of (A) the number of shares of Common Stock not
issued to the holder on or prior to the Warrant Share Delivery Date and (B) the
Weighted Average Price of the Common Stock on the Warrant Share Delivery Date,
and (ii) if the Company has failed to deliver a Warrant to the holder on or
prior to the Warrant Delivery Date, 0.5% of the product of (x) the
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number of shares of Common Stock issuable upon exercise of the Warrant as of the
Warrant Delivery Date, and (y) the Weighted Average Price of the Common Stock on
the Warrant Delivery Date; provided that in no event shall cash damages accrue
pursuant to this Section 2(d) during the period, if any, in which any Warrant
Shares are the subject of a bona fide dispute that is subject to and being
resolved pursuant to, and in compliance with the time periods and other
provisions of, the dispute resolution provisions of Section 2(a). Alternatively,
subject to the dispute resolution provisions of Section 2(a) or if the issuance
of such Warrant Shares is subject to limitation pursuant to Section 12, at the
election of the holder made in the holder's sole discretion, the Company shall
pay to the holder, in lieu of the additional damages referred to in the
preceding sentence (but in addition to all other available remedies that the
holder may pursue hereunder and under the Securities Purchase Agreement
(including indemnification pursuant to Section 8 thereof)), 110% of the amount
by which (A) the holder's total purchase price (including brokerage commissions,
if any) for shares of Common Stock purchased to make delivery in satisfaction of
a sale by such holder of the shares of Common Stock to which the holder is
entitled but has not received upon an exercise, exceeds (B) the net proceeds
received by the holder from the sale of the shares of Common Stock to which the
holder is entitled but has not received upon such exercise.
(e) If, despite the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, the Warrant Shares to
be issued are not registered and available for resale pursuant to a registration
statement in accordance with the Registration Rights Agreement, including during
a Grace Period (as defined in the Registration Rights Agreement), then
notwithstanding anything contained herein to the contrary, the holder of this
Warrant may, at its election exercised 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 Weighted Average Price of the Common Stock on
the trading day immediately preceding the date of the
delivery of the Exercise Notice; and
C= the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
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(f) Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon exercise of this Warrant in accordance with the terms hereof, the
holder of this Warrant shall not be required to physically surrender this
Warrant to the Company unless it is being exercised for all of the Warrant
Shares represented by the Warrant. The holder and the Company shall maintain
records showing the number of Warrant Shares exercised and issued and the dates
of such exercises or shall use such other method, reasonably satisfactory to the
holder and the Company, so as not to require physical surrender of this Warrant
upon each such exercise. In the event of any dispute or discrepancy, such
records of the Company establishing the number of Warrant Shares to which the
holder is entitled shall be controlling and determinative in the absence of
demonstrable error. Notwithstanding the foregoing, if this Warrant is exercised
as aforesaid, the holder may not transfer this Warrant unless the holder first
physically surrenders this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the holder a new Warrant of like
tenor, registered as the holder may request, representing in the aggregate the
remaining number of Warrant Shares represented by this Warrant. The holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following exercise of any portion of
this Warrant, the number of Warrant Shares represented by this Warrant may be
less than the number stated on the face hereof. Each Warrant shall bear the
following legend:
ANY TRANSFEREE OF THIS WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF
THIS WARRANT, INCLUDING SECTION 2(f) HEREOF. THE SECURITIES
REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE NUMBER SET FORTH ON
THE FACE HEREOF PURSUANT TO SECTION 2(f) HEREOF.
Section 3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for
or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 110% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant on the Principal Market
(subject to official notice of issuance upon exercise of this Warrant) and each
other market or exchange on which the Common Stock is traded or listed and shall
maintain, so long as any other shares of Common
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Stock shall be so traded or listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on the Principal Market and each other market or exchange on which
the Common Stock is traded or listed and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on the
Principal Market and each other market or exchange on which the Common Stock is
traded or listed.
(e) The Company will not, by amendment of its Articles 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against impairment, consistent with the tenor and purpose 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 $0.0001 per share, and (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.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes (excluding
income taxes, franchise taxes or other taxes levied on gross earnings, profits
or the like of the holder of this Warrant) that may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Shareholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose (other than to the extent that
the holder is deemed to be a beneficial holder of shares under applicable
securities laws after taking into account the limitation set forth in the first
paragraph of this Warrant), nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, 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
Deemed Issuance Date of the Warrant Shares that such holder 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
shareholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the shareholders of the Company generally,
contemporaneously with the giving thereof to the shareholders.
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Section 6. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant, and upon
exercise hereof (other than pursuant to a Cashless Exercise) will acquire the
Warrant Shares, for its own account and not with a view towards, or for resale
in connection with, the public sale or distribution of this Warrant or the
Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(3) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "ACCREDITED INVESTOR"). Each delivery of an
Exercise Notice, other than in connection with a Cashless Exercise, shall
constitute confirmation at such time by the holder of the representations
concerning the Warrant Shares set forth in the first two sentences of this
Section 6, unless contemporaneous with the delivery of such Exercise Notice, the
holder notifies the Company in writing that it is not making such
representations (a "REPRESENTATION NOTICE"). If the holder delivers a
Representation Notice in connection with an exercise, it shall be a condition to
such holder's exercise of this Warrant and the Company's obligations set forth
in Section 2 in connection with such exercise, that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of this Warrant
shall not violate any United States or state securities laws, and the time
periods for the Company's compliance with its obligations set forth in Section 2
shall be tolled until such holder provides the Company with such other
representations.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall be
assignable by the holder hereof without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares for
resale under the Securities Act pursuant to the Registration Rights Agreement,
and the initial holder of this Warrant (and assignees thereof) is entitled to
the registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of Warrant
Shares. The Warrant Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:
-10-
[<115% WARRANTS> (a)) ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF
SHARES UPON ISSUANCE OF COMMON STOCK. IF AND WHENEVER ON OR AFTER THE WARRANT
DATE, THE COMPANY ISSUES OR SELLS, OR IS DEEMED TO HAVE ISSUED OR SOLD, ANY
SHARES OF COMMON STOCK (INCLUDING THE ISSUANCE OR SALE OF SHARES OF COMMON STOCK
OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY, BUT EXCLUDING EXEMPTED
ISSUANCES (AS DEFINED BELOW)), FOR A CONSIDERATION PER SHARE LESS THAN A PRICE
EQUAL TO THE WARRANT EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ISSUANCE
OR SALE (THE "APPLICABLE PRICE"), THEN IMMEDIATELY AFTER SUCH ISSUE OR SALE THE
WARRANT EXERCISE PRICE THEN IN EFFECT SHALL BE REDUCED TO AN AMOUNT EQUAL TO
SUCH CONSIDERATION PER SHARE. UPON EACH SUCH ADJUSTMENT OF THE WARRANT EXERCISE
PRICE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE, THE NUMBER OF SHARES OF
COMMON STOCK ACQUIRABLE UPON EXERCISE OF THIS WARRANT SHALL BE ADJUSTED TO THE
NUMBER OF SHARES DETERMINED BY MULTIPLYING THE WARRANT EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH ADJUSTMENT BY THE NUMBER OF SHARES OF COMMON STOCK
ACQUIRABLE UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
AND DIVIDING THE PRODUCT THEREOF BY THE WARRANT EXERCISE PRICE RESULTING FROM
SUCH ADJUSTMENT. FOR PURPOSES OF THIS WARRANT, "EXEMPTED ISSUANCES" SHALL MEAN:
(I) SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY PURSUANT
TO AN APPROVED STOCK PLAN, PROVIDED THAT THE NUMBER OF SUCH SHARES ISSUED OR
DEEMED TO BE ISSUED (x) IN 2005 DOES NOT EXCEED 4.5% OF THE NUMBER OF
OUTSTANDING SHARES OF COMMON STOCK AS OF DECEMBER 31, 2004 AND (y) IN ANY
SUBSEQUENT CALENDAR YEAR DOES NOT EXCEED 3.5% OF THE NUMBER OF OUTSTANDING
SHARES OF COMMON STOCK AS OF THE END OF THE IMMEDIATELY PRECEDING YEAR; (II)
SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY UPON THE
CONVERSION, EXCHANGE OR EXERCISE OF ANY RIGHT, OPTION, OBLIGATION OR SECURITY
OUTSTANDING ON THE DATE PRIOR TO THE DATE OF THE SECURITIES PURCHASE AGREEMENT
AND SET FORTH IN SCHEDULE 3(c) TO THE SECURITIES PURCHASE AGREEMENT, PROVIDED
THAT THE TERMS OF SUCH OPTION, OBLIGATION OR SECURITY ARE NOT AMENDED OR
OTHERWISE MODIFIED ON OR AFTER THE DATE OF THE SECURITIES PURCHASE AGREEMENT; OR
(III) SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY UPON
CONVERSION OF THE NOTES OR EXERCISE OF THE SPA WARRANTS.]
[<140% WARRANTS> (a) ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF
SHARES UPON ISSUANCE OF COMMON STOCK. IF AND WHENEVER ON OR AFTER THE WARRANT
DATE, THE COMPANY ISSUES OR SELLS, OR IS DEEMED TO HAVE ISSUED OR SOLD, ANY
SHARES OF COMMON STOCK (INCLUDING THE ISSUANCE OR SALE OF SHARES OF COMMON STOCK
OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY, BUT EXCLUDING EXEMPTED
ISSUANCES (AS DEFINED BELOW)), FOR A CONSIDERATION PER SHARE LESS THAN A PRICE
(A) EQUAL TO THE WARRANT EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH
ISSUANCE OR SALE (THE "APPLICABLE PRICE") BUT GREATER THAN OR EQUAL TO [INSERT
115% OF THE ARITHMETIC AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK
ON EACH OF THE FIVE CONSECUTIVE TRADING DAYS IMMEDIATELY PRECEDING THE WARRANT
DATE] (SUBJECT TO ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS, STOCK
COMBINATIONS AND OTHER SIMILAR TRANSACTIONS OCCURRING AFTER THE WARRANT DATE),
THEN IMMEDIATELY AFTER SUCH ISSUE OR SALE THE WARRANT EXERCISE PRICE THEN IN
EFFECT SHALL BE REDUCED TO AN AMOUNT EQUAL TO THE PRODUCT OF (x) THE APPLICABLE
PRICE AND (y) THE QUOTIENT DETERMINED BY DIVIDING (1) THE SUM OF (I) THE PRODUCT
DERIVED BY MULTIPLYING THE APPLICABLE PRICE BY THE NUMBER OF SHARES OF COMMON
STOCK DEEMED OUTSTANDING IMMEDIATELY PRIOR TO SUCH ISSUE OR SALE, PLUS (II) THE
CONSIDERATION, IF ANY, RECEIVED BY THE COMPANY UPON SUCH ISSUE OR SALE, BY (2)
THE PRODUCT DERIVED BY MULTIPLYING THE (I) APPLICABLE PRICE BY (II) THE NUMBER
OF SHARES OF COMMON STOCK DEEMED OUTSTANDING IMMEDIATELY AFTER SUCH ISSUE OR
SALE OR (B) EQUAL TO
-11-
THE LESSER OF THE APPLICABLE PRICE AND [INSERT 115% OF THE ARITHMETIC AVERAGE OF
THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK ON EACH OF THE FIVE CONSECUTIVE
TRADING DAYS IMMEDIATELY PRECEDING THE WARRANT DATE] (SUBJECT TO ADJUSTMENT FOR
STOCK SPLITS, STOCK DIVIDENDS, STOCK COMBINATIONS AND OTHER SIMILAR TRANSACTIONS
OCCURRING AFTER THE WARRANT DATE), THEN IMMEDIATELY AFTER SUCH ISSUE OR SALE THE
WARRANT EXERCISE PRICE THEN IN EFFECT SHALL BE REDUCED TO AN AMOUNT EQUAL TO
SUCH CONSIDERATION PER SHARE. UPON EACH SUCH ADJUSTMENT OF THE WARRANT EXERCISE
PRICE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE, THE NUMBER OF SHARES OF
COMMON STOCK ACQUIRABLE UPON EXERCISE OF THIS WARRANT SHALL BE ADJUSTED TO THE
NUMBER OF SHARES DETERMINED BY MULTIPLYING THE WARRANT EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH ADJUSTMENT BY THE NUMBER OF SHARES OF COMMON STOCK
ACQUIRABLE UPON EXERCISE OF THIS WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
AND DIVIDING THE PRODUCT THEREOF BY THE WARRANT EXERCISE PRICE RESULTING FROM
SUCH ADJUSTMENT. FOR PURPOSES OF THIS WARRANT, "EXEMPTED ISSUANCES" SHALL MEAN:
(I) SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY PURSUANT
TO AN APPROVED STOCK PLAN, PROVIDED THAT THE NUMBER OF SUCH SHARES ISSUED OR
DEEMED TO BE ISSUED (x) IN 2005 DOES NOT EXCEED 4.5% OF THE NUMBER OF
OUTSTANDING SHARES OF COMMON STOCK AS OF DECEMBER 31, 2004 AND (y) IN ANY
SUBSEQUENT CALENDAR YEAR DOES NOT EXCEED 3.5% OF THE NUMBER OF OUTSTANDING
SHARES OF COMMON STOCK AS OF THE END OF THE IMMEDIATELY PRECEDING YEAR; (II)
SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY UPON THE
CONVERSION, EXCHANGE OR EXERCISE OF ANY RIGHT, OPTION, OBLIGATION OR SECURITY
OUTSTANDING ON THE DATE PRIOR TO THE DATE OF THE SECURITIES PURCHASE AGREEMENT
AND SET FORTH IN SCHEDULE 3(c) TO THE SECURITIES PURCHASE AGREEMENT, PROVIDED
THAT THE TERMS OF SUCH OPTION, OBLIGATION OR SECURITY ARE NOT AMENDED OR
OTHERWISE MODIFIED ON OR AFTER THE DATE OF THE SECURITIES PURCHASE AGREEMENT; OR
(III) SHARES OF COMMON STOCK ISSUED OR DEEMED TO BE ISSUED BY THE COMPANY UPON
CONVERSION OF THE NOTES OR EXERCISE OF THE SPA WARRANTS.]
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable to issuances other than Exempted
Issuances:
(i) Issuance of Options. If the Company in any manner grants
or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 8(b)(i), the "lowest price per
share for which one share of Common Stock is issuable upon exercise of any such
Option or upon conversion, exchange or exercise of any Convertible Security
issuable upon exercise of any such Option" shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon the granting or sale of such
Option, upon exercise of such Option and upon conversion, exchange or exercise
of any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Security upon the exercise of such
Option or upon the actual issuance of such Common Stock upon conversion,
exchange or exercise of such Convertible Security.
-12-
(ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exchange or exercise thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 8(b)(ii),
the "lowest price per share for which one share of Common Stock is issuable upon
such conversion, exchange or exercise" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to one share of Common Stock upon the issuance or sale of any such
Convertible Security and upon conversion, exchange or exercise of such
Convertible Security. No further adjustment of the Warrant Exercise Price shall
be made upon the actual issuance of such Common Stock upon conversion, exchange
or exercise of such Convertible Security, and if any such issue or sale of such
Convertible Security is made upon exercise of any Option for which adjustment of
the Warrant Exercise Price had been or are to be made pursuant to other
provisions of this Section 8(b), no further adjustment of the Warrant Exercise
Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the
purchase, exchange or exercise price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange or exercise
of any Convertible Securities, or the rate at which any Options or Convertible
Securities are convertible into or exchangeable or exercisable for Common Stock
changes at any time, the Warrant Exercise Price in effect at the time of such
change shall be adjusted to the Warrant Exercise Price that would have been in
effect at such time had such Options or Convertible Securities provided for such
changed purchase, exchange or exercise price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of shares of Common Stock acquirable hereunder
shall be correspondingly readjusted. For purposes of this Section 8(b)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
date of issuance of this Warrant are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change. No adjustment shall
be made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. In case any
Options are issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction or series of related
transactions, (A) the Options will be deemed to have been issued for a
consideration equal to the greater of $0.01 and the specific aggregate
consideration, if any, allocated to such Options (in either case, the "OPTION
CONSIDERATION") and, for purposes of applying the provisions of this Section 8,
the Option Consideration shall be allocated pro rata among all the shares of
Common Stock issuable upon exercise of such Options to determine the
consideration per each such share of Common Stock and (B) the other securities
will be deemed to have been issued for an aggregate consideration
-13-
equal to the aggregate consideration received by the Company for the Options and
other securities (determined as provided below with respect to each share of
Common Stock represented thereby), less the sum of (1) the Black-Scholes Value
(as defined below) of such Options and (2) the Option Consideration. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the Weighted Average Price of such securities on
the date of receipt of such securities. If any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holder of this Warrant. If
such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair
value of such consideration will be determined within five (5) Business Days
after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the holder of this
Warrant. The determination of such appraiser shall be final and binding upon all
parties absent demonstrable error, and the fees and expenses of such appraiser
shall be borne by the Company.
(ii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(iii) Black-Scholes Value. The "BLACK-SCHOLES VALUE" of any
Options shall mean the sum of the amounts resulting from applying the
Black-Scholes pricing model to each such Option, which calculation is made with
the following inputs: (i) the "option striking price" being equal to the lowest
exercise price possible under the terms of such Option on the date of the
issuance of such Option (the "VALUATION DATE"), (ii) the "interest rate" being
equal to the interest rate on one-year United States Treasury Bills issued most
recently prior to the Valuation Date, (iii) the "time until option expiration"
being the time from the Valuation Date until the expiration date of such Option,
(iv) the "current stock price" being equal to the Weighted Average Price of the
Common Stock on the Valuation Date, (v) the "volatility" being the 100-day
historical volatility of the Common Stock as of the Valuation Date (as reported
by the Bloomberg "HVT" screen), and (vi) the "dividend rate" being equal to
zero. Within three (3) Business Days after the Company Valuation Date, each of
the Company and the holder of this Warrant shall deliver to the other a written
calculation of its determination of the Black-Scholes value of the Options. If
the holder and the Company are unable to agree upon the calculation of the
Black-Scholes Value of the Options within five (5) Business Days of the
Valuation Date,
-14-
then the Company shall submit via facsimile the disputed calculation to an
investment banking firm (jointly selected by the Company and the holder of this
Warrant) within seven (7) Business Days of the Valuation Date. The Company shall
direct such investment banking firm to perform the calculations and notify the
Company and the holder of the results no later than ten (10) Business Days after
the Valuation Date. Such investment banking firm's calculation of the
Black-Scholes Value of the Options shall be deemed conclusive absent
demonstrable error. The Company shall bear the fees and expenses of such
investment banking firm for providing such calculation.
(c) Adjustment of Warrant Exercise Price 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) its outstanding shares of Common Stock into a
greater number of shares, the Warrant Exercise Price in effect immediately prior
to such subdivision will be proportionately reduced and the number of shares of
Common Stock obtainable upon exercise of this Warrant 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) its outstanding
shares of Common Stock into a smaller number of shares, the Warrant Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock obtainable upon exercise of
this Warrant will be proportionately decreased. Any adjustment under this
Section 8(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective
(d) Distribution of Assets. If the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a "DISTRIBUTION"), at any time
after the issuance of this Warrant, then, in each such case:
(i) the Warrant Exercise Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Weighted Average Price of the Common Stock on the trading
day immediately preceding such record date minus the value of the Distribution
(as determined in good faith by the Company's Board of Directors) applicable to
one share of Common Stock, and (B) the denominator shall be the Weighted Average
Price of the Common Stock on the trading day immediately preceding such record
date; and
(ii) either (A) the number of Warrant Shares obtainable upon
exercise of this Warrant shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i), or (B) in the event
that the Distribution is of common stock of a company whose common stock is
traded on a national securities exchange or a national automated quotation
system, then the holder of this
-15-
Warrant shall receive an additional warrant, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable for the amount of the assets that would have been payable to the
holder of this Warrant pursuant to the Distribution had the holder exercised
this Warrant immediately prior to such record date and with an exercise price
equal to the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding clause (i).
(e) Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 8 but not expressly provided for by such
provisions (including the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board of
Directors will make an appropriate adjustment in the Warrant Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the holders of the SPA Warrants; provided that no
such adjustment will increase the Warrant Exercise Price or decrease the number
of shares of Common Stock obtainable as otherwise determined pursuant to this
Section 8.
(f) Notices.
(i) Within four (4) Business Days of any adjustment of the
Warrant Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(ii) The Company will give written notice to the holder of
this Warrant at least ten (10) 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 pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined in Section 9(b)),
dissolution or liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.
(iii) The Company will also give written notice to the holder
of this Warrant at least ten (10) days prior to the date on which any Organic
Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale. (a) In addition to any adjustments pursuant to
Section 8 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of its capital stock
(the "PURCHASE RIGHTS"), then the holder of this Warrant will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights that such holder could have acquired if such holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
-16-
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction that is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "ORGANIC CHANGE." 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 successor resulting from such Organic Change (in
each case, the "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of SPA Warrants representing at least two-thirds
(2/3) of the shares of Common Stock obtainable upon exercise of the SPA Warrants
then outstanding) to deliver to each holder of SPA Warrants in exchange for each
such SPA Warrant, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant and
satisfactory to the holders of such SPA Warrant (including, an adjusted warrant
exercise price equal to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and exercisable for a corresponding number
of shares of Common Stock acquirable and receivable upon exercise of such SPA
Warrant (without regard to any limitations on exercises), if the value so
reflected is less than the Warrant Exercise Price in effect immediately prior to
such consolidation, merger or sale). Prior to the consummation of any other
Organic Change, the Company shall make appropriate provision (in form and
substance satisfactory to the holders of such SPA Warrants representing at least
two-thirds (2/3) of the shares of Common Stock obtainable upon exercise of the
SPA Warrants then outstanding) to ensure that each of the holders of the SPA
Warrants will thereafter 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 such holder's SPA
Warrants (without regard to any limitations on exercises), 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
that would have been acquirable and receivable upon the exercise of such
holder's Warrant as of the date of such Organic Change (without taking into
account any limitations or restrictions on the exerciseability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking by the holder (or in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business 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:
-17-
If to the Company:
Infinity, Inc.
1401 West Main Street, Suite C
Chanute, Kansas 66720
Telephone: 620-431-6200
Facsimile: 620-431-6262
Attention: Chief Executive Officer
and
Infinity, Inc.
950 17th Street
Suite 800
Denver, Colorado 80202
Telephone: 720-932-7800
Facsimile: 720-932-5409
Attention: Senior Vice President
With copy to:
Davis Graham & Stubbs, LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
Telephone: 303-892-9400
Facsimile: 303-893-1379
Attention: Deborah Friedman, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or, in the case of the holder or any other Person named above, at such other
address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice to the other party at least
five (5) days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a nationally
recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or deposit with a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
Section 12. Limitation on Number of Warrant Shares. The Company shall not
be obligated to issue any Warrant Shares upon exercise of the SPA Warrants if
the issuance of such shares of Common Stock would exceed that number of Warrant
Shares which the Company may issue upon exercise of the SPA Warrants (the
"EXCHANGE CAP") without breaching the Company's obligations under the rules or
regulations of the Principal Market, except that such
-18-
limitation shall not apply in the event that the Company obtains a written
opinion from outside counsel to the Company that approval of the Company's
shareholders is not required under the applicable rules of the Principal Market,
which opinion shall be reasonably satisfactory to the holders representing at
least two-thirds (2/3) of the Warrant Shares then issuable upon exercise of
outstanding SPA Warrants. Until Shareholder Approval (as defined in the
Securities Purchase Agreement) or such written opinion is obtained, no holder of
SPA Warrants shall be issued, upon exercise of the SPA Warrants, Warrant Shares
in an amount greater than such holder's Cap Allocation Amount (as defined in the
Notes). In the event that any holder of SPA Warrants shall sell or otherwise
transfer any of such SPA Warrants, the transferee shall be allocated a pro rata
portion of such holder's Cap Allocation Amount. In the event that, after the
Initial Closing Date (as defined in the Securities Purchase Agreement), any
holder of the SPA Warrants shall convert all of such holder's Notes and 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 Cap Allocation Amount, then the
difference between such holder's Cap Allocation Amount and the number of Warrant
Shares and Conversion Shares (as defined in the Securities Purchase Agreement)
actually issued to such holder shall be allocated to the respective Cap
Allocation Amounts of the remaining holders of SPA Warrants and Notes on a pro
rata basis in proportion to the Warrant Shares and Conversion Shares issuable
upon exercise and conversion of the SPA Warrants and the Notes, respectively,
then held by each such holder. In the event that upon the delivery of an
Exercise Notice the Company is prohibited from issuing Warrant Shares as a
result of the operation of this Section 12, the Company shall repurchase for
cash, within five (5) Business Days, the portion of this Warrant with respect to
which Warrant Shares cannot be issued as result of this Section 12, at a price
per Warrant Share equal to the difference between the Weighted Average Price of
the Common Stock and the Warrant Exercise Price of such Warrant Shares as of the
date of the attempted exercise.
Section 13. Date. The date of this Warrant is [INSERT: DATE OF APPLICABLE
CLOSING] (the "WARRANT DATE"). This Warrant, in all events, shall be wholly void
and of no effect after 11:59 P.M., New York Time, on the Expiration Date, except
that notwithstanding any other provisions hereof, the provisions of Section 7
shall continue in full force and effect after such date as to any Warrant Shares
or other securities issued upon the exercise of this Warrant.
Section 14. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the SPA Warrants 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 two-thirds (2/3) of the shares of
Common Stock obtainable upon exercise of the SPA Warrants then outstanding;
provided that no such action may increase the Warrant Exercise Price of any SPA
Warrant or decrease the number of shares or change the class of stock obtainable
upon exercise of any SPA Warrant without the written consent of the holder of
such SPA Warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. All questions
concerning the construction, validity, enforcement and interpretation 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
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(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
Section 16. Rules of Construction. Unless the context otherwise requires,
(a) all references to Sections, Schedules or Exhibits are to Sections, Schedules
or Exhibits contained in or attached to this Warrant, (b) each accounting term
not otherwise defined in this Warrant has the meaning assigned to it in
accordance with GAAP, (c) words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, the feminine or neuter
gender shall include the masculine, feminine and neuter and (d) the use of the
word "including" in this Warrant shall be by way of example rather than
limitation.
* * * * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as
of the ____ day of _________, 200_.
INFINITY, INC.
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
INFINITY, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Infinity,
Inc., a Colorado corporation (the "COMPANY"), evidenced by the attached Warrant
(the "WARRANT"). 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
Warrant Exercise Price shall be made as:
____________ a "CASH EXERCISE" with respect to ________________
Warrant Shares; and/or
____________ a "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 Aggregate Exercise Price in the
sum of $___________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver __________
Warrant Shares in accordance with the terms of the Warrant in the following name
and to the following address:
Issue to:______________________________________________________________
Facsimile Number:_________________________________________________________
DTC Participant Number and Name (if electronic book entry transfer):______
Account Number (if electronic book entry transfer):_______________________
Date: _______________ __, ______
Name of Registered Holder
By:____________________________
Name:
Title:
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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 ________________, 200_
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
INFINITY, INC.
By:______________________________
Name:____________________________
Title____________________________
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EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Infinity, Inc., a Colorado
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _________, 200_
_________________________________
Name:____________________________
Title:___________________________
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