EXHIBIT 10.61
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN EXEMPTION FROM SUCH REGISTRATION.
No. WA-C-1 Warrant to Purchase 1,250,000 Shares of
Common Stock (subject to adjustment)
WARRANT TO PURCHASE COMMON STOCK
OF
INCOMNET, INC.
This certifies that, for value received, IRONWOOD TELECOM LLC and its
registered assigns ("Holder") is entitled, subject to the terms set forth
below, to purchase from INCOMNET, INC., a California corporation (the
"Company"), 1,250,000 shares of the Common Stock of the Company, on the date
the Company's Articles of Incorporation are amended to provide for a
sufficient number of authorized shares of Common Stock to allow for the
issuance of the number of shares of Common Stock underlying this Warrant (the
date of such amendment, the "Initial Exercise Date"), upon surrender hereof,
at the principal office of the Company referred to below, with the Notice of
Exercise form attached hereto (the "Notice of Exercise") duly executed, and
simultaneous payment therefor in lawful money of the United States as
hereinafter provided, at the Exercise Price as set forth in Section 2 below.
The number, character and Exercise Price of such shares of Common Stock are
subject to adjustment as provided below. The term "Warrant" as used herein
shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein.
This Warrant is issued in connection with the transactions described
in the Intercreditor and Subordination Agreement, dated as of April 9, 1999,
between Foothill Capital Corporation and the Holder.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the
term commencing on the Initial Exercise Date and ending at 5:00 p.m., Pacific
Standard Time, on the five-year anniversary of the Initial Exercise Date, and
shall be void thereafter.
2. EXERCISE PRICE. The Exercise Price at which this Warrant may
be exercised shall be $1.00 per share of Common Stock, as adjusted from time
to time pursuant to Section 11 hereof.
3. EXERCISE OF WARRANT.
3.1. NOTICE OF EXERCISE. The purchase rights represented by
this Warrant are exercisable by the holder in whole or in part, but not for
less than 10,000 shares at a time (or such lesser number of shares which may
then constitute the maximum number purchasable; such number being subject to
adjustment as provided in Section 11 below), at any time, or from time to
time, during the term hereof as described in Section 1 above, by the
surrender of this Warrant and the Notice of Exercise duly completed and
executed on behalf of the Holder, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing on the books of the
Company), upon payment in cash or by check acceptable to the Company of the
purchase price of the shares to be purchased.
3.2. ISSUANCE OF STOCK. This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the shares of Common Stock issuable upon such exercise shall be treated for
all purposes as the holder of record of such shares as of the close of
business on such date. As promptly as practicable on or after such date and
in any event within ten (10) days thereafter, the Company at its expense
shall issue and deliver to the person or persons entitled to receive the same
a certificate or certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part, the Company
at its expense will execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this Warrant may then be
exercised.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise
be entitled, the Company shall make a cash payment equal to the Exercise
Price multiplied by such fraction.
5. REPLACEMENT OF WARRANT. On receipt 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, on delivery of
an indemnity agreement reasonably satisfactory in form and substance to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of
this Warrant, a new warrant of like tenor and amount.
2
6. RIGHTS OF SHAREHOLDERS. Subject to Sections 9 and 11 of this
Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such,
any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised as provided herein.
7. TRANSFER OF WARRANT.
7.1. WARRANT REGISTER. The Company will maintain a register
(the "Warrant Register") containing the names and addresses of the Holder or
Holders. Any Holder of this Warrant or any portion thereof may change its
address as shown on the Warrant Register by written notice to the Company
requesting such change and the Company shall immediately make the appropriate
changes on the Warrant Register. Any notice or written communication
required or permitted to be given to the Holder may be delivered or given by
mail to such Holder as shown on the Warrant Register and at the address shown
on the Warrant Register. Until this Warrant is transferred on the Warrant
Register of the Company, the Company may treat the Holder as shown on the
Warrant Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
7.2. WARRANT AGENT. The Company may, by written notice to
the Holder, appoint an agent for the purpose of maintaining the Warrant
Register referred to in Section 7(a) above, issuing the Common Stock or other
securities then issuable upon the exercise of this Warrant, exchanging this
Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or replacement, as the case may
be, shall be made at the office of such agent.
7.3. TRANSFERABILITY AND NON-NEGOTIABILITY OF WARRANT. This
Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company), provided, however, that this
Warrant may not be transferred in part unless such transfer is to a
transferee who pursuant to such transfer receives the right to purchase at
least 10,000 shares hereunder. Subject to the provisions of this Warrant
with respect to compliance with the Securities Act of 1933, as amended (the
"Act"), title to this Warrant may be transferred by endorsement (by the
3
Holder executing the Assignment Form attached hereto (the "Assignment Form")
and delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.
7.4. EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of
this Warrant for exchange, properly endorsed on the Assignment Form and
subject to the provisions of this Warrant with respect to compliance with the
Act and with the limitations on assignments and transfers and contained in
this Section 7, the Company at its expense shall issue to or on the order of
the Holder a new warrant or warrants of like tenor, in the name of the Holder
or as the Holder (on payment by the Holder of any applicable transfer taxes)
may direct, for the number of shares issuable upon exercise hereof.
7.5. COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock or Common
Stock to be issued upon exercise hereof are being acquired solely for the
Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose
of this Warrant or any shares of Common Stock to be issued upon exercise
hereof except under circumstances that will not result in a violation of
the Act or any state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased
are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
(ii) This Warrant and all shares of Common Stock issued
upon exercise hereof shall be stamped or imprinted with a legend in
substantially the following form (in addition to any legend required by
state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED
HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST
4
MADE BY THE HOLDER OR RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
8. RESERVATION OF STOCK. The Company covenants that during the
term this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the exercise of this Warrant and, from
time to time, will take all steps necessary to amend its Articles of
Incorporation (the "Articles") to provide sufficient reserves of shares of
Common Stock issuable upon exercise of this Warrant; provided, however, that
as of April 9, 1999 the Company does not have any shares of Common Stock
available for issuance upon the exercise of this Warrant, and the Holder
hereby acknowledges that she understands that shares of Common Stock are so
unavailable; provided, further, that the Company hereby covenants and agrees
to request that its shareholders approve of a proposal at the next annual
meeting of shareholders to amend the Articles to increase the Company's
authorized Common Stock in sufficient number to provide for the issuance of
all securities of the Company outstanding as of the Initial Exercise Date
exercisable or convertible into Common Stock. The Company further covenants
that all shares that may be issued upon the exercise of rights represented by
this Warrant, upon exercise of the rights represented by this Warrant and
payment of the Exercise Price, all as set forth herein, will be free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously or otherwise specified
herein). The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES. Upon the written request of the Holder, whenever the
Exercise Price or number of shares purchasable hereunder shall be adjusted
pursuant to Section 11 hereof, the Company shall issue a certificate signed
by its Chief Financial Officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, and the Exercise Price and number of shares
purchasable hereunder after giving effect to such adjustment, and shall cause
a copy of such certificate to be mailed (by first-class mail, postage
prepaid) to the Holder of this Warrant. All notices and requests required
under this Warrant shall be in writing and shall be deemed to have been given
for all purposes (a) upon personal delivery, (b) one day after being sent,
when sent by professional overnight courier service from and to locations
within the continental United States, (c) five days after posting when sent
by registered or certified mail, or (d) on the date of transmission (if
transmitted during normal business hours otherwise on the next succeeding
business day) when sent by telegram, telegraph, telex or telecopier,
addressed to the Holder at its addresses set
5
forth on the Warrant Register, and addressed to the Company at 2801 Main
Street, Irvine, California 92614, Telecopier No. (949) 224-7474. The Holder
or the Company may from time to time by notice in writing delivered as
provided herein, designate a different mailing address to which such notices
or requests shall thereafter be delivered.
10. AMENDMENTS.
10.1. AMENDMENT. Any term of this Warrant may be amended with
the written consent of the Company and the Holder. Any amendment effected in
accordance with this Section 10 shall be binding upon the Company and each
future holder of this Warrant.
10.2. WAIVER. No waivers of, or exceptions to, any term,
condition or provision of this Warrant, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
term, condition or provision.
11. ADJUSTMENTS. The Exercise Price and the number of shares
purchasable hereunder are subject to adjustment from time to time as follows:
11.1. MERGER, SALE OF ASSETS, ETC. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be
(i) a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which
the Company is the surviving entity but the shares of the Company's capital
stock outstanding immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful
provision shall be made so that the holder of this Warrant shall thereafter
be entitled to receive upon exercise of this Warrant, during the period
specified herein and upon payment of the Exercise Price then in effect, the
number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale
or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 11.
The foregoing provisions of this Section 11.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and
to the stock or securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. If the per-share consideration
payable to the
6
holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant with respect to the rights and interests of
the Holder after the transaction, to the end that the provisions of this
Warrant shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
exercise of this Warrant.
11.2. RECLASSIFICATION, ETC. If the Company, at any time
while this Warrant, or any portion thereof, remains outstanding and unexpired
by reclassification of securities or otherwise, shall change any of the
securities as to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind
of securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such reclassification or other change and the
Exercise Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 11.
11.3. SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as
to which purchase rights under this Warrant exist, into a different number of
securities of the same class, the Exercise Price for such securities shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
11.4. ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES
OR PROPERTY. If while this Warrant, or any portion hereof, remains
outstanding and unexpired the holders of the securities as to which purchase
rights under this Warrant exist at the time shall have received, or, on or
after the record date fixed for the determination of eligible shareholders,
shall have become entitled to receive, without payment therefor, other or
additional stock or other securities or property (other than cash) of the
Company by way of dividend, then and in each case, this Warrant shall
represent the right to acquire, in addition to the number of shares of the
security receivable upon exercise of this Warrant, and without payment of any
additional consideration therefor, the amount of such other or additional
stock or other securities or property (other than cash) of the Company that
such holder would hold on the date of such exercise had it been the holder of
record of the security receivable upon exercise of this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such
7
period, giving effect to all adjustments called for during such period by the
provisions of this Section 11.
11.5. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment pursuant to this Section 11, the Company
shall, upon the written request, at any time, of any Holder of this Warrant,
furnish or cause to be furnished to such Holder a like certificate setting
forth: (i) adjustments and readjustments in accordance with the terms hereof;
(ii) the Exercise Price at the time in effect; and (iii) the number of shares
and the amount, if any, of other property that at the time would be received
upon the exercise of the Warrant.
12. REGISTRATION RIGHTS. Upon exercise of this Warrant, the Holder
shall have and be entitled to exercise, together with all other holders of
Registrable Securities possessing registration rights under that certain
Registration Rights Agreement, dated November 4, 1998, herewith, between the
Company, the Holder and the other parties identified therein or are otherwise
bound thereby (the "Registration Rights Agreement"), the rights of
registration granted under the Registration Rights Agreement to Registrable
Securities (with respect to the shares issued on exercise of this Warrant).
By its receipt of this Warrant, Holder agrees to be bound by the Registration
Rights Agreement upon exercise of this Warrant as a party thereto.
13. MISCELLANEOUS.
(A) ATTORNEYS' FEES. In any action at law or in equity to
enforce any of the provisions or rights under this Warrant, the unsuccessful
party to such litigation, as determined by the court in a final judgment or
decree, shall pay the successful party all costs, expenses and reasonable
attorneys' fees incurred by the successful party (including, without
limitation, costs, expenses and fees on any appeal).
(B) GOVERNING LAW; VENUE. This Warrant and the legal
relations between the Holder and the Company shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines of any other State or country. In the event of any action at
law or equity to enforce any of the provisions or rights under this
Agreement, the parties agree that the proper venue for such action is Denver,
Colorado and that the parties may bring such an action to enforce their
respective rights under this Agreement only in a court located within Douglas
or Jefferson County, State of Colorado. The parties further agree that such
court shall have personal jurisdiction over each of the parties to this
Agreement.
8
IN WITNESS WHEREOF, INCOMNET, INC. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: April 9, 1999 INCOMNET, INC.
By: /s/ Denis Richard
------------------------------
Denis Richard
President and Chief Executive Officer
ATTEST:
By: /s/ George Blanco
------------------------------
George Blanco
Secretary
9
NOTICE OF EXERCISE
TO: INCOMNET, INC.
(1) The undersigned hereby elects to purchase ______ shares of
Common Stock of INCOMNET, INC., pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares
in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or the Common Stock are being
acquired solely for the account of the undersigned and not as a nominee for
any other party, and for investment, and that the undersigned will not offer,
sell or otherwise dispose of any such shares of Common Stock or Common Stock
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing those
shares of Common Stock in the name of the undersigned or in such other name
as is specified below:
--------------------------------------
(Name)
--------------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
--------------------------------------
(Name)
- ------------------------------- --------------------------------------
(Date) (Signature)
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock (or Common Stock) set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________________________
as Attorney-in-Fact to make such transfer on the books of INCOMNET, INC.,
maintained for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof or conversion thereof are being acquired for investment
and that the Assignee will not offer, sell or otherwise dispose of this
Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this
Warrant, the Assignee shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the shares of stock so purchased
are being acquired for investment and not with a view toward distribution or
resale.
Dated:
---------------------
-------------------------------------
Signature of Holder
ATTEST:
- --------------------------------------
Signature of Assignee