EXHIBIT 10.6
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
RAPTOR NETWORKS TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: M-1-___
Number of Shares of Common Stock: __________
Date of Issuance: July 31, 2006 ("ISSUANCE DATE")
Raptor Networks Technology, Inc., a Colorado corporation, (the
"COMPANY"), hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, ___________________
the registered holder hereof or its permitted assigns (the "HOLDER"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to purchase Common
Stock issued in exchange, transfer or replacement hereof, the "WARRANT"), at any
time or times on or after the date of the consummation of a Mandatory Conversion
(as defined in the SPA Securities), but not after 11:59 p.m., New York Time, on
the Expiration Date (as defined below), _______________ ( ) fully paid
nonassessable shares of Common Stock (as defined below) (the "WARRANT SHARES").
Except as otherwise defined herein, capitalized terms in this Warrant shall have
the meanings set forth in Section 15. This Replacement Warrant is one of the
Warrants to Purchase Common Stock (including additional warrants and replacement
warrants issued pursuant to the Amendment and Exchange Agreements (as defined
below), the "SPA WARRANTS") amends, supplements, modifies and completely
restates and supersedes the warrants, dated as of the Subscription Date (the
"EXISTING WARRANTS"), issued by the Company to the Holder for the exercise of
___________ shares of Common Stock, but shall not, except as specifically
amended hereby or as set forth in the Holder's Amendment and Exchange
Agreements, constitute a release, satisfaction or novation of any of the
obligations under the Existing Warrants or any other Transaction Document (as
defined in the Securities Purchase Agreement). This Warrant is one of an issue
of warrants issued pursuant to Section 1 of those certain Amendment and Exchange
Agreements, dated as of January 18, 2007, by and between each of the Buyers
(as defined in the Securities Purchase Agreement) and the Company (the
"AMENDMENT AND EXCHANGE AGREEMENTS").
1. EXERCISE OF WARRANT.
(a) MECHANICS OF EXERCISE. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the Holder on any day on or after the
date of the consummation of a Mandatory Conversion in whole or in part, by (i)
delivery of a written notice, in the form attached hereto as EXHIBIT A (the
"EXERCISE NOTICE"), of the Holder's election to exercise this Warrant and (ii)
(A) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the "AGGREGATE EXERCISE PRICE") in cash or wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is
being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)).
The Holder shall not be required to deliver the original Warrant in order to
effect an exercise hereunder. Execution and delivery of the Exercise Notice with
respect to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first Business Day following the date on which the Company has received each of
the Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall transmit by
facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery
Documents to the Holder and the Company's transfer agent (the "TRANSFER AGENT").
On or before the third Business Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "SHARE DELIVERY DATE"), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common
Stock to which the Holder is entitled pursuant to such exercise to the Holder's
or its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, deliver to be received no later than
the Share Delivery Date, to the address as specified in the Exercise Notice, a
certificate, registered in the Company's share register in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Notice and Aggregate Exercise Price referred to in clause (ii)(A) above or
notification to the Company of a Cashless Exercise referred to in Section 1(d),
the Holder shall be deemed for all corporate purposes to have become the holder
of record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date of delivery of the certificates evidencing
such Warrant Shares. If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than five (5) Business Days after any
exercise and at its own expense, issue a new Warrant (in accordance with Section
7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
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number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant. Notwithstanding any provision of this Warrant to
the contrary, no more than the Maximum Eligibility Number of Warrant Shares
shall be exercisable hereunder, except as a result of anti-dilution adjustments
as provided herein.
(b) EXERCISE PRICE. For purposes of this Warrant, "EXERCISE
PRICE" means $0.43948, subject to adjustment as provided herein.
(c) COMPANY'S FAILURE TO TIMELY DELIVER SECURITIES. If the
Company shall fail for any reason or for no reason to issue to the Holder within
five (5) Trading Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, then, in addition to all other remedies available to
the Holder, the Company shall pay in cash to the Holder on each day after such
third Business Day that the issuance of such shares of Common Stock is not
timely effected an amount equal to 1.5% of the product of (A) the sum of the
number of shares of Common Stock not issued to the Holder on a timely basis and
to which the Holder is entitled and (B) the Closing Sale Price of the shares of
Common Stock on the Trading Day immediately preceding the last possible date
which the Company could have issued such shares of Common Stock to the Holder
without violating Section 1(a). In addition, if within three (3) Trading Days
after the Company's receipt of the facsimile copy of a Exercise Notice the
Company shall fail to issue and deliver a certificate to the Holder and register
such shares of Common Stock on the Company's share register or credit the
Holder's balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon such holder's exercise hereunder, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that the Holder
anticipated receiving from the Company (a "BUY-IN"), then the Company shall,
within five (5) Business Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such certificate (and to issue such shares of Common
Stock) or credit such Holder's balance account with DTC shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit such Holder's
balance account with DTC and pay cash to the Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.
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(d) CASHLESS EXERCISE. Notwithstanding anything contained
herein to the contrary, if a Registration Statement (as defined in the
Registration Rights Agreement) covering the Warrant Shares that are the subject
of the Exercise Notice (the "UNAVAILABLE WARRANT SHARES") is not available for
the resale of such Unavailable Warrant Shares at any time after the one-year
anniversary of the Issuance Date, the Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "CASHLESS EXERCISE"):
Net Number = (A X B) - (A X C)
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B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant is
then being exercised.
B= the Closing Sale Price of the shares of Common Stock (as reported by
Bloomberg) on the date immediately preceding the date of the Exercise Notice.
C= the Exercise Price then in effect for the applicable Warrant Shares
at the time of such exercise.
(e) DISPUTES. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 12.
(f) Limitations on Exercises.
(i) BENEFICIAL OWNERSHIP. The Company shall not effect
the exercise of this Warrant, and the Holder shall not have the
right to exercise this Warrant, to the extent that after giving
effect to such exercise, such Person (together with such
Person's affiliates) would beneficially own in excess of 4.99%
of the shares of Common Stock outstanding immediately after
giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall
include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon (A)
exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (B)
exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially
owned by such Person and its affiliates (including, without
limitation, any convertible notes or convertible preferred
stock or warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein. Except
as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). For purposes of this
Warrant, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding
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shares of Common Stock as reflected in (1) the Company's most
recent Form 10-K, 10-KSB, Form 10-Q, 10-QSB, Current Report on
Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time,
upon the written or oral request of the Holder, the Company
shall within two (2) Business Day confirm orally and in writing
to the 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 or exercise of securities of the Company, including
the SPA Securities and the SPA Warrants, by the Holder and its
affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. By written
notice to the Company, the Holder may increase or decrease the
Maximum Percentage to any other percentage not in excess of
9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the Holder and not
to any other holder of SPA Warrants.
(ii) PRINCIPAL MARKET REGULATION. The Company shall
not be obligated to issue any shares of Common Stock upon
exercise of this Warrant or conversion of SPA Securities and no
Buyer shall be entitled to receive any shares of Common Stock
if the issuance of such shares of Common Stock would exceed
that number of shares of Common Stock which the Company may
issue upon exercise or conversion, as applicable, of the SPA
Warrants and SPA Securities or otherwise without breaching the
Company's obligations under the rules or regulations of any
applicable Eligible Market (the "EXCHANGE CAP"), except that
such limitation shall not apply in the event that the Company
(A) obtains the approval of its shareholders as required by the
applicable rules of the Eligible Market for issuances of shares
of Common Stock in excess of such amount or (B) obtains a
written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no Buyer shall be issued in the
aggregate, upon exercise or conversion, as applicable, of any
SPA Warrants or SPA Securities, shares of Common Stock in an
amount greater than the product of the Exchange Cap multiplied
by a fraction, the numerator of which is the total number of
shares of Common Stock underlying the SPA Warrants issued to
such Buyer pursuant to the Amendment and Exchange Agreement on
the Issuance Date and the denominator of which is the aggregate
number of shares of Common Stock underlying the SPA Warrants
issued to all the Buyers, on a pro rata basis, pursuant to the
Amendment and Exchange Agreement on the Issuance Date (with
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respect to each Buyer, the "EXCHANGE CAP ALLOCATION"). In the
event that any Buyer shall sell or otherwise transfer any of
such Buyer's SPA Warrants, the transferee shall be allocated a
pro rata portion of such Buyer's Exchange Cap Allocation, and
the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA
Warrants into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Exchange Cap Allocation,
then the difference between such holder's Exchange Cap
Allocation and the number of shares of Common Stock actually
issued to such holder shall be allocated to the respective
Exchange Cap Allocations of the remaining holders of SPA
Warrants on a pro rata basis in proportion to the shares of
Common Stock underlying the SPA Warrants then held by each such
holder. In the event that the Company is prohibited from
issuing any Warrant Shares for which an Exercise Notice has
been received as a result of the operation of this Section
1(f)(ii), the Company shall pay cash in exchange for
cancellation of such Warrant Shares, at a price per Warrant
Share equal to the difference between the Closing Sale Price
and the Exercise Price as of the date of the attempted
exercise.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) ADJUSTMENT UPON ISSUANCE OF SHARES OF COMMON STOCK. If and
whenever on or after the Subscription Date the Company issues or sells, or in
accordance with this Section 2 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 shares of Common Stock
deemed to have been issued by the Company in connection with any Excluded
Securities (as defined in the SPA Securities)) for a consideration per share
(the "NEW ISSUANCE PRICE") less than the Exercise Price (the "APPLICABLE PRICE")
in effect immediately prior to such issue or sale or deemed issuance or sale
(the foregoing a "DILUTIVE ISSUANCE"), then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the New Issuance Price. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares shall be adjusted to the number of
shares of Common Stock determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) ISSUANCE OF OPTIONS. If the Company in any manner
grants any Options and the lowest price per share for which one
share of shares of Common Stock is issuable upon the exercise
of any such Option or upon conversion, exercise or exchange 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
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this Section 2(a)(i), the "lowest price per share for which one
share of shares of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such
Convertible Securities" 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 shares of Common Stock
upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any
Convertible Security issuable upon exercise of such Option. No
further adjustment of the Exercise Price or number of Warrant
Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities.
(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 shares of Common Stock is issuable upon the conversion,
exercise or exchange 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
2(a)(ii), the "lowest price per share for which one share of
shares of Common Stock is issuable upon the conversion,
exercise or exchange" 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 shares of Common Stock
upon the issuance or sale of the Convertible Security and upon
conversion, exercise or exchange of such Convertible Security.
No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any
Options for which adjustment of this Warrant has been or is to
be made pursuant to other provisions of this Section 2(a), no
further adjustment of the Exercise Price or number of Warrant
Shares shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion,
exercise or exchange of any Convertible Securities, or the rate
at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock
increases or decreases at any time, the Exercise Price and the
number of Warrant Shares in effect at the time of such increase
or decrease shall be adjusted to the Exercise Price and the
number of Warrant Shares which would have been in effect at
such time had such Options or Convertible Securities provided
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for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(a)(iii), if the terms of any Option
or Convertible Security that were outstanding as of the date of
issuance of this Warrant are increased or decreased in the
manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of
such increase or decrease. No adjustment pursuant to this
Section 2(a)(iii) shall be made if such adjustment would result
in an increase of the Exercise Price then in effect or a
decrease in the number of Warrant Shares.
(iv) CALCULATION OF CONSIDERATION RECEIVED. In case
any Option or Convertible Security is issued in connection with
the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific
consideration is allocated to such Option or Convertible
Security by the parties thereto, the Option or Convertible
Security will be deemed to have been issued for a consideration
of $0.01. If any shares of 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 shares of 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 publicly traded securities, in which
case the amount of consideration received by the Company will
be the Closing Sale Price of such security on the date of
receipt. If any shares of 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 shares of Common Stock, Options or Convertible Securities,
as the case may be. The fair value of any consideration other
than cash or publicly traded securities will be determined
jointly by the Company and the Required Holders. 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 day
following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Required
Holders. The determination of such appraiser shall be final and
binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company.
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(v) RECORD DATE. If the Company takes a record of the
holders of shares of Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in
shares of Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase shares of 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.
(b) ADJUSTMENT UPON SUBDIVISION OR COMBINATION OF SHARES OF
COMMON STOCK. If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares
will be proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2(b) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(c) OTHER EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, 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 Exercise
Price and the number of Warrant Shares so as to protect the rights of the
Holder; provided that no such adjustment pursuant to this Section 2(c) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
(d) ADJUSTMENT UPON EVENT OF DEFAULT. Upon the occurrence of an
Event of Default (as defined in the SPA Securities), the Exercise Price shall be
reset to the lower of (A) the Exercise Price then in effect and (B) the Average
Market Price of the Common Stock; provided, however, that no such adjustment
pursuant to this Section 2(d) will increase the Exercise Price. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares shall
be adjusted to the number of shares of Common Stock determined by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares acquirable upon exercise of this Warrant immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Any adjustment under this Section 2(d) shall become
effective at the close of business on the date immediately after such Event of
Default.
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3. RIGHTS UPON 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 shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "DISTRIBUTION"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close
of business on the record date fixed for the determination of holders of shares
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 Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the shares of 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 shares of Common Stock, and (ii) the denominator shall be the Closing
Bid Price of the shares of Common Stock on the Trading Day immediately preceding
such record date; and
(b) the number of Warrant Shares 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 shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
shares of common stock ("OTHER SHARES OF COMMON STOCK") of a company whose
common shares are traded on a national securities exchange or a national
automated quotation system, then the Holder may elect to receive a warrant to
purchase Other Shares of Common Stock in lieu of an increase in the number of
Warrant Shares, the terms of which shall be identical to those of this Warrant,
except that such warrant shall be exercisable into the number of shares of Other
Shares of Common Stock that would have been payable to the Holder pursuant to
the Distribution had the Holder exercised this Warrant immediately prior to such
record date and with an aggregate exercise price equal to the product of 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 paragraph
(a) and the number of Warrant Shares calculated in accordance with the first
part of this paragraph (b).
4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) PURCHASE RIGHTS. In addition to any adjustments pursuant to
Section 2 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 shares of Common
Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on the 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 shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
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(b) FUNDAMENTAL TRANSACTIONS. The Company shall not enter into
or be party to a Fundamental Transaction unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Warrant and the
other Transaction Documents in accordance with the provisions of this Section
(4)(b) pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for
the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the "Company" shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein. Upon consummation
of the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other property)
purchasable upon the exercise of the Warrant prior to such Fundamental
Transaction, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the
Common Stock (or other securities, cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had the Warrant been exercised immediately prior to such Fundamental
Transaction. Provision made pursuant to the preceding sentence shall be in a
form and substance reasonably satisfactory to the Required Holders. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant.
-11-
(c) Notwithstanding the foregoing and the provisions of Section
4(b) above, in the event of a Fundamental Transaction, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental
Transaction, then the Holder shall have the right to require such Successor
Entity to purchase this Warrant from the Holder by paying to the Holder,
simultaneously with the consummation of the Fundamental Transaction and in lieu
of the warrant referred to in Section 4(b), cash in an amount equal to the value
of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black and Scholes
Option Pricing Model reflecting (i) a risk-free interest rate corresponding to
the U.S. Treasury rate for a period equal to the remaining term of this Warrant
as of such date of request and (ii) an expected volatility equal to the greater
of 60% and the 100 day volatility obtained from the HVT function on Bloomberg.
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the 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 6, the Company shall provide the Holder 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.
6. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SPA Warrants, prior to the Stockholder Approval Deadline (as defined in the
Securities Purchase Agreement), 15,466,649 shares of Common Stock
to effect the exercise of the Series L-1
SPA Warrants then outstanding (without regard to any limitations on exercise)
and, from and after the Stockholder Approval Deadline, 130% of the number of
shares of Common Stock as shall from time to time be necessary to effect the
exercise of the SPA Warrants then outstanding (without regard to any limitations
on exercise).
-12-
7. REISSUANCE OF WARRANTS.
(a) TRANSFER OF WARRANT. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
(d) ISSUANCE OF NEW WARRANTS. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated
on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the shares of Common Stock, (B) with respect to
any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of shares
of Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.
-13-
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within two Business Days submit via
facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to
the Company's independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
-14-
14. TRANSFER. This Warrant may be offered for sale, sold, transferred
or assigned without the consent of the Company, except as may otherwise be
required by Section 2(g) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
(a) "AVERAGE MARKET PRICE" means the lesser of (i) the
arithmetic average of the Weighted Average Price of the Common Stock during the
twenty (20) consecutive Trading Day period commencing on the Trading Day
immediately after the date of the public disclosure of such Event of Default,
(ii) the arithmetic average of the Weighted Average Price of the Common Stock
during the five (5) consecutive Trading Day period beginning during the (20)
consecutive Trading Days period commencing on the Trading Day immediately after
the date of the public disclosure of such Event of Default and (iii) the
arithmetic average of the Weighted Average Price of the Common Stock during the
five (5) consecutive Trading Day period commencing on the sixteenth (16th)
Trading Day immediately he date of the public disclosure of such Event of
Default; provided, that all such determinations shall be appropriately adjusted
for any stock split, stock dividend, stock combination or other similar
transaction that proportionately decreases or increases the Common Stock during
such periods.
(b) "BLOOMBERG" means Bloomberg Financial Markets.
(c) "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.
(d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 12. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
-15-
(e) "COMMON STOCK" means (i) the Company's shares of Common
Stock, par value $.001 per share, and (ii) any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.
(f) "CONVERTIBLE SECURITIES" means any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(g) "ELIGIBLE MARKET" means the Principal Market, the American
Stock Exchange, The New York Stock Exchange, Inc., The NASDAQ Global Market, The
NASDAQ Global Select Market or The NASDAQ Capital Market.
(h) "EXPIRATION DATE" means the date eighty-four (84) months
after the earlier of (x) the Additional Effective Date (as defined in the
Registration Rights Agreement) of the first Additional Registration Statement
(as defined in the Registration Rights Agreement) filed to register any of the
Warrant Shares hereunder and (y) such date that all the Warrant Shares hereunder
may be sold pursuant to Rule 144(k) of the 1933 Act without restriction or, if
such date falls on a day other than a Business Day or on which trading does not
take place on the Principal Market (a "HOLIDAY"), the next date that is not a
Holiday.
(i) "FUNDAMENTAL TRANSACTION" means that the Company shall
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than the 50% of either the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock, or (vi) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act), become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
(j) "MAXIMUM ELIGIBILITY NUMBER" means initially, zero, and
shall be increased successively each time that the Company elects a Mandatory
Conversion (as defined in the SPA Securities) by the number of shares equal to
65% of the number of shares of Common Stock otherwise issuable upon conversion
of that portion of the SPA Securities being redeemed by the Company pursuant to
such Mandatory Conversion at such time.
-16-
(k) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.
(l) "PARENT ENTITY" of a Person means an entity that, directly
or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.
(m) "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(n) "PRINCIPAL MARKET" means the OTC Bulletin Board.
(o) "REGISTRATION RIGHTS AGREEMENT" means that certain Amended
and Restated Registration Rights Agreement dated as of January 18, 2007 by
and among the Company and the Buyers, as the same may be amended, modified or
supplemented from time to time, relating to, among other things, the
registration of the resale of the Common Stock issuable upon conversion of the
SPA Securities and exercise of the SPA Warrants.
(p) "REQUIRED HOLDERS" means the holders of the SPA Warrants
representing at least a majority of shares of Common Stock underlying the SPA
Warrants then outstanding.
(q) "SECURITIES PURCHASE AGREEMENT" means that certain
Securities Purchase Agreement, dated as of the Subscription Date, by and among
the Company and the Buyers referred to therein, as the same may be amended,
modified or supplemented from time to time.
(r) "SPA SECURITIES" means the Notes issued pursuant to the
Amendment and Exchange Agreements.
(s) "SUBSCRIPTION DATE" means July 30, 2006.
(t) "SUCCESSOR ENTITY" means the Person (or, if so elected by
the Required Holders, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.
(u) "TRADING DAY" means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).
-17-
(v) "WEIGHTED AVERAGE PRICE" means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by 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 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
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 Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for a security on a particular 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. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 12. All such
determinations are to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
[SIGNATURE PAGE FOLLOWS]
-18-
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.
RAPTOR NETWORKS TECHNOLOGY, INC.
By: /S/ THOMAS M. WITTENSCHLAEGER
-----------------------------
Name: Thomas M. Wittenschlaeger
Title: Chief Executive Officer
-19-
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
RAPTOR NETWORKS TECHNOLOGY, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Raptor
Networks Technology, Inc., a Colorado corporation (the "COMPANY"), evidenced by
the attached Warrant to Purchase Common Stock (the "WARRANT"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
____________ a "CASH EXERCISE" with respect to _________________
Warrant Shares; and/or
____________ a "CASHLESS EXERCISE" with respect to _____________
Warrant Shares.
2. Payment of 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 to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
________________________________ ___________________________
Name of Registered Holder Social Security or Tax ID
Number of Holder
By: ____________________________
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
First American Stock Transfer to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated July 31,
2006 from the Company and acknowledged and agreed to by First American Stock
Transfer.
RAPTOR NETWORKS TECHNOLOGY, INC.
By: _______________________________
Name:
Title: