WARRANT TO PURCHASE STOCK
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THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE STOCK
COMPANY: RapidTron, Inc., a Nevada corporation
NUMBER OF SHARES: 150,862
CLASS OF STOCK: Series Common
WARRANT PRICE: $0.58 per share
ISSUE DATE: Is the Warrant Effective Date, which is the date in which
the Holder executes this Warrant
EXPIRATION DATE: The 5th anniversary after the Issue Date
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the company (the "Company") at the Warrant
Price, all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
in this Warrant.
ARTICLE 1. EXERCISE.
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1.1 Method of Exercise. Holder may exercise this Warrant by
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delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Article 1.2, Holder shall also
deliver to the Company a check, wire transfer (to an account designated by the
Company), or other form of payment acceptable to the Company for the aggregate
Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
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specified in Article 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Article 1.3.
1.3 Fair Market Value. If the Company's common stock is traded in
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a public market and the Shares are common stock, the fair market value of each
Share shall be the average closing price of a Share reported for the ten (10)
business days immediately before Holder delivers its Notice of Exercise to the
Company (or in the instance where the Warrant is
exercised immediately prior to the effectiveness of the Company's initial public
offering, the "price to public" per share price specified in the final
prospectus relating to such offering). If the Company's common stock is traded
in a public market and the Shares are preferred stock, the fair market value of
a Share shall be the closing price of a share of the Company's common stock
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company (or, in the instance where the Warrant is exercised
immediately prior to the effectiveness of the Company's initial public offering,
the initial "price to public" per share price specified in the final prospectus
relating to such offering), in both cases, multiplied by the number of shares
of the Company's common stock into which a Share is convertible. If the
Company's common stock is not traded in a public market, the Board of Directors
of the Company shall determine fair market value in its reasonable good faith
judgment.
1.4 Delivery of Certificate and New Warrant. Promptly after
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Holder exercises or converts this Warrant and, if applicable, the Company
receives payment of the aggregate Warrant Price, the Company shall deliver to
Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation on surrender and cancellation of this Warrant, the
Company shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
1.6 Treatment of Warrant Upon Acquisition of Company.
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1.6.1 "Acquisition". For the purpose of this Warrant,
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"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.6.2 Treatment of Warrant at Acquisition.
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A) Upon the written request of the Company, Holder agrees that, in the event
of an Acquisition that is not an asset sale and in which the sole consideration
is cash, either (a) Holder shall exercise its conversion or purchase right under
this Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such Acquisition.
The Company shall provide the Holder with written notice of its request relating
to the foregoing (together with such reasonable information as the Holder may
request in connection with such contemplated Acquisition giving rise to such
notice), which is to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.
B) Upon the written request of the Company, Holder agrees that, in the event
of an Acquisition that is an "arms length" sale of all or substantially all of
the Company's assets (and only its assets) to a third party that is not an
Affiliate (as defined below) of the Company (a "True Asset Sale"), either (a)
Holder shall exercise its conversion or purchase right under this Warrant and
such exercise will be deemed effective immediately prior to the consummation of
such Acquisition or (b) if Holder elects not to exercise the Warrant, this
Warrant will continue until the Expiration Date if the Company continues as a
going concern following the closing of any such True Asset Sale. The Company
shall provide the Holder with written notice of its request
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relating to the foregoing (together with such reasonable information as the
Holder may request in connection with such contemplated Acquisition giving rise
to such notice), which is to be delivered to Holder not less than ten (10) days
prior to the closing of the proposed Acquisition.
C) Upon the closing of any Acquisition other than those particularly
described in subsections (A) and (B) above, the successor entity shall assume
the obligations of this Warrant.
As used herein "Affiliate" shall mean any person or entity that owns or controls
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directly or indirectly ten (10) percent or more of the stock of Company, any
person or entity that controls or is controlled by or is under common control
with such persons or entities, and each of such person's or entity's officers,
directors, joint venturers or partners, as applicable.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
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2.1 Stock Dividends, Splits, Etc. If the Company declares or pays
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a dividend on the Shares payable in common stock, or other securities, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive, without
cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the
dividend occurred. If the Company subdivides the Shares by reclassification or
otherwise into a greater number of shares or takes any other action which
increase the amount of stock into which the Shares are convertible, the number
of shares purchasable hereunder shall be proportionately increased and the
Warrant Price shall be proportionately decreased. If the outstanding shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution.
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Upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles or
Certificate (as applicable) of Incorporation upon the closing of a registered
public offering of the Company's common stock. The Company or its successor
shall promptly issue to Holder an amendment to this Warrant setting forth the
number and kind of such new securities or other property issuable upon exercise
or conversion of this Warrant as a result of such reclassification, exchange,
substitution or other event that results in a change of the number and/or class
of securities issuable upon exercise or conversion of this Warrant. The
amendment to this Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Article 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Reserved.
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2.4 No Impairment. The Company shall not, by amendment of its
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Articles or Certificate (as applicable) of Incorporation or through a
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
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performed under this Warrant by the Company, but shall at all times in good
faith assist in carrying out of all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.5 Fractional Shares. No fractional Shares shall be issuable
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upon exercise or conversion of this Warrant and the number of Shares to be
issued shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder the amount
computed by multiplying the fractional interest by the fair market value of a
full Share.
2.6 Certificate as to Adjustments. Upon each adjustment of the
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Warrant Price, the Company shall promptly notify Holder in writing, and, at the
Company's expense, promptly compute such adjustment, and furnish Holder with a
certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
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3.1 Representations and Warranties. The Company represents and
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warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(c) The Capitalization Table previously provided to Holder
remains true and complete as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time
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(a) to declare any dividend or distribution upon any of its stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; or (b) offer holders of registration rights the opportunity to
participate in an underwritten public offering of the Company's securities for
cash, then, in connection with each such event, the Company shall give Holder:
(1) at least 10 days prior written notice of the date on which a record will be
taken for such dividend, distribution, or subscription rights (and specifying
the date on which the holders of common stock will be entitled thereto), and (2)
in the case of the matter referred to in (b) above, the same notice as is given
to the holders of such registration rights. The Company shall deliver to Holder
all notices and correspondence which is delivered to shareholders (regardless of
whether such notices or correspondence is delivered to holders of convertible
securities or other non-shareholders).
3.3 Registration Under Securities Act of 1933, as amended. The
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Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit A, if attached.
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3.4 No Shareholder Rights. Except as provided in this Warrant,
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the Holder will not have any rights as a shareholder of the Company until the
exercise of this Warrant.
ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and
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warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant is, and the securities
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to be acquired upon exercise of this Warrant by the Holder will be, acquired for
investment for the Holder's account, not as a nominee or agent, and not with a
view to the public resale or distribution within the meaning of the Act. Holder
also represents that the Holder has not been formed for the specific purpose of
acquiring this Warrant or the Shares.
4.2 Disclosure of Information. The Holder has received or has had
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full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the acquisition of this Warrant
and its underlying securities. The Holder further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.
4.3 Investment Experience. The Holder understands that the
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purchase of this Warrant and its underlying securities involves substantial
risk. The Holder has experience as an investor in securities of companies in
the development stage and acknowledges that the Holder can bear the economic
risk of such Holder's investment in this Warrant and its underlying securities
and has such knowledge and experience in financial or business matters that the
Holder is capable of evaluating the merits and risks of its investment in this
Warrant and its underlying securities and/or has a preexisting personal or
business relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Holder to be aware
of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. The Holder is an "accredited
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investor" within the meaning of Regulation D promulgated under the Act.
4.5 The Act. The Holder understands that this Warrant and the
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Shares issuable upon exercise or conversion hereof have not been registered un
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
and status as an "accredited investor" as expressed herein. The Holder
understands that this Warrant and/or the Shares issued upon any exercise or
conversion hereof (including by a transferee of this Warrant that is not an
"accredited investor") must be held indefinitely unless subsequently registered
under the 1933 Act and qualified under applicable state securities laws, or
unless exemption from such registration and qualification are otherwise
available.
ARTICLE 5. MISCELLANEOUS.
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5.1 Term: This Warrant is exercisable in whole or in part at any
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time and from time to time on or before the Expiration Date.
5.2 Legends. This Warrant and the Shares (and the securities
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issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
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THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF
LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and
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the Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder's
parent company) or any other affiliate of Holder. Additionally, the Company
shall also not require an opinion of counsel if there is no material question as
to the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
5.4 Transfer Procedure. Upon receipt by Holder of the executed
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Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares,
Holder's parent company, by execution of an Assignment substantially in the form
of Appendix 2. Subject to the provisions of Article 5.3 and upon providing
Company with written notice, Silicon Valley Bancshares and any subsequent Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the Shares issuable directly or indirectly, upon conversion of
the Shares, if any) to any transferee, provided, however, in connection with any
such transfer, Silicon Valley Bancshares or any subsequent Holder will give the
Company notice of the portion of the Warrant being transferred with the name,
address and taxpayer identification number of the transferee and Holder will
surrender this Warrant to the Company for reissuance to the transferee(s) (and
Holder if applicable). The Company may refuse to transfer this Warrant or the
Shares to any person who directly competes with the Company, unless, in either
case, the stock of the Company is publicly traded.
5.5 Notices. All notices and other communications from the
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Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may (or on the first business day after transmission by
facsimile) be, in writing by the Company or such Holder from time to time.
Effective upon receipt of the fully executed Warrant and the initial transfer
described in Article 5.4 above, all notices to the Holder shall be addressed as
follows until the Company receives notice of a change of address in connection
with a transfer or otherwise:
Silicon Valley Bancshares
Attn: Treasury Department
3003 Tasman Drive, HA 200
Santa Clara, CA 95054
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Telephone: 408-654-7400
Facsimile: 408-496-2405
Notice to the Company shall be addressed as follows until the Holder receives
notice of a change in address:
RapidTron, Inc.
Attn: ____________________
3151 Airway Avenue, Building Q
Costa Mesa, CA 92626
5.6 Waiver. This Warrant and any term hereof may be changed,
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waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
5.7 Attorney's Fees. In the event of any dispute between the
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parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorney's fees.
5.8 Automatic Conversion upon Expiration. In the event that, upon
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the Expiration Date, the fair market value of one Share (or other security
issuable upon the exercise hereof) as determined in accordance with Section 1.3
above is greater than the Exercise Price in effect on such date, then this
Warrant shall automatically be deemed on and as of such date to be converted
pursuant to Section 1.2 above as to all Shares (or such other securities) for
which it shall not previously have been exercised or converted, and the Company
shall promptly deliver a certificate representing the Shares (or such other
securities) issued upon such conversion to the Holder.
5.9 Counterparts. This Warrant may be executed in counterparts,
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all of which together shall constitute one and the same agreement.
5.10 Governing Law. This Warrant shall be governed by and
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construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
RAPIDTRON, INC.
By: /s/ John A. Creel By: /s/ Peter Dermutz
- --------------------------------------------- ---------------------------------------------
Name:_John A. Creel Name:___Peter Dermutz
- --------------------------------------------- ---------------------------------------------
(Print) (Print)
Title: Chairman of the Board, President or Title: Chief Financial Officer, Secretary,
Vice President Assistant Treasurer or Assistant Secretary
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"HOLDER"
SILICON VALLEY BANK
By:
--------------------------------
Name:
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(Print)
Title:
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APPENDIX 1
NOTICE OF EXERCISE
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1. Holder elects to purchase ___________ shares of the Common/Series
______ Preferred [strike one] Stock of __________________ pursuant to the terms
of the attached Warrant, and tenders payment of the purchase price of the shares
in full.
[or]
1. Holder elects to convert the attached Warrant into Shares/cash
[strike one] in the manner specified in the Warrant. This conversion is
exercised for _____________________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing the shares
in the name specified below:
___________________________________________
Holders Name
___________________________________________
___________________________________________
(Address)
3. By its execution below and for the benefit of the Company, Holder
hereby restates each of the representations and warranties in Article 4 of the
Warrant as the date hereof.
HOLDER:
_________________________
By:____________________________
Name:__________________________
Title:_________________________
(Date):________________________
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