EXHIBIT 4.4
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH THE
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
EFAX.COM, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: W-2 Number of Shares: 105,000
Date of Issuance: May 13, 1999
EFAX.COM, INC., a Delaware corporation (the "Company"), hereby certifies that,
WINGATE CAPITAL LTD., the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this warrant (this "Warrant"), at any time or times on or
after the date hereof, but not after 11:59 P.M. Central Time on the Expiration
Date (as defined herein) one hundred five thousand (105,000) fully paid
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares") at the purchase price per share provided in Section 1(b)
below; provided, however, that the Company shall not effect the exercise of
this Warrant and no holder of this Warrant shall 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) (A) would beneficially own in
excess of 10.00% of the outstanding shares of the Common Stock following such
conversion or (B) would have acquired, through the exercise of this Warrant or
otherwise, in excess of 10.00% of the outstanding shares of the Common Stock
following such exercise during the 60-day period ending on and including such
exercise date. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by a Person and its affiliates or acquired by a
Person and its affiliates, as the case may be, 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 the
number of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, non-exercised Warrants beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company (including, without limitation,
the Preferred Shares (as defined in the Securities Purchase
1
Agreement)) subject to a limitation on conversion or exercise analogous tothe
limitation contained herein beneficially owned by such Person and its
affiliates. Except as set forth in the preceding sentence, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in
determining the number of outstanding shares of Common Stock a holder may rely
on the number of outstanding shares of Common Stock as reflected in (1) the
Company's most recent Form 10-Q or Form 10-K, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral
request of the holder of this Warrant, the Company shall within two (2)
Business Days confirm orally and in writing to any such holder the number of
shares Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the exercise
of this Warrant and the conversion of Preferred Shares by such holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
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warrants of the Company issued pursuant to the Securities Purchase Agreement,
dated as of May 7, 1999, among the Company and the investors set forth on the
Schedule of Investors attached thereto (the "Securities Purchase Agreement").
(b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "Approved Stock Plan" shall mean any employee benefit plan
which has been approved by the Board of Directors of the Company, pursuant to
which the Company's securities may be issued to any employee, officer, director
or consultant for services provided to the Company.
(ii) "Business Day" means a day on which the Principal Market
or, if the Principal Market is not the principal trading market for the Common
Stock, the principal trading market for the Common Stock is open for general
trading of securities.
(iii) "Certificate of Designations" means the Company's
Certificate of Designations, Preferences and Rights of the Preferred Shares.
(iv) "Closing Bid Price" means, for any security as of any
date, the last closing bid price for such security on the Principal Market (as
defined below) as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
the Principal Market is not the principal trading market for such security, the
last closing bid price 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 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 is reported
for such security by Bloomberg, the last closing trade price for such security
as reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the
2
average of the bid prices of any market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the holder of
this Warrant. If the Company and the holder of this Warrant are unable to
agree upon the fair market value of the Common Stock, then such dispute shall
be resolved pursuant to the same procedures as provided in Section 2(d)(iii) of
the Certificate of Designations with the term "Closing Bid Price" being
substituted for the term "Market Price". All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
(v) "Closing Sale Price" means, for any security as of any
date, the last closing trade price for such security on the Principal Market as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing trade
price 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 trade price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the last closing ask price of such security as reported
by Bloomberg, or, if no last closing ask price is reported for such security by
Bloomberg, the average of the ask prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Sale Price cannot be calculated for such security on such date on any
of the foregoing bases, the Closing Sale Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
holder of this Warrant. If the Company and the holder of this Warrant are
unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to the same procedures as provided in
Section 2(d)(iii) of the Certificate of Designations with the term "Closing
Sale Price" being substituted for the term "Market Price". All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
(vi) "Common Stock" means (i) the Company's common stock, par
value $0.001 per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock.
(vii) "Common Stock Deemed Outstanding" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock issuable upon conversion or exercise
of outstanding Options (as defined below) and Convertible Securities (as
defined below) regardless of whether the Options or Convertible Securities are
actually exercisable or convertible at such time, but excluding any shares of
Common Stock owned or held by or for the account of the Company or issuable
upon exercise of the Warrants.
(viii) "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable
for Common Stock.
(ix) "Excluded Securities" means any of the following (A) any
issuance by the Company of securities in connection with a strategic
3
partnership or joint venture (the primary purpose of which is not to raise
equity capital), (B) shares of Common Stock issued by the Company in a firm
commitment, underwritten public offering and (C) any issuance by the Company of
securities as consideration for a merger or consolidation or the acquisition of
a business, product, license or other assets of another person or entity.
(x) "Expiration Date" means the date four (4) years from the
date of this Warrant or, if such date falls on a Saturday, Sunday or other day
on which banks are required or authorized to be closed in the State of
California or on which trading does not take place on the principal exchange or
automated quotation system on which the Common Stock is traded (a "Holiday"),
the next date that is not a Holiday.
(xi) "Initial Warrant Exercise Price" means the Warrant
Exercise Price in effect on the Issuance Date (as defined in Section 13),
subject to adjustment as provided herein.
(xii) "Market Price" means, with respect to any security for
any period, that price which shall be computed as the arithmetic average of the
Closing Bid Prices for such security on each of the 20 consecutive Business
Days immediately preceding such date of determination. All such determinations
to be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
(xiii) "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(xiv) "Other Securities" means those rights, warrants, options
and convertible securities of the Company issued prior to, and outstanding on,
the date of issuance of this Warrant.
(xv) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xvi) "Principal Market" means the Nasdaq National Market.
(xvii) "Registration Rights Agreement" means that certain
registration rights agreement between the Company and the initial holders of
the Preferred Shares relating to the filing of a registration statement
covering the resale of the shares of Common Stock issuable upon conversion of
the Preferred Shares and the exercise of this Warrant.
(xviii) "Securities Act" means the Securities Act of 1933, as
amended.
(xix) "Warrant" means this Warrant and all Warrants issued in
exchange, transfer or replacement of any thereof.
(xx) "Warrant Exercise Price" shall be equal to 110% of the of
the average of the Closing Bid Prices of the Common Stock for the five
consecutive Business Days immediately preceding the Issuance Date, subject to
adjustment as provided herein (including, without limitation, pursuant to
Section 8(e)).
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Section 2. Section Exercise of Warrant.
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(a) Subject to the terms and conditions hereof, this Warrant may
be exercised by the holder hereof then registered on the books of the Company,
in whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Central Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (plus any applicable issue
or transfer taxes) (the "Aggregate Exercise Price") in cash or by check or wire
transfer or (B) by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section 2(e)), and (iii) the
surrender to a common carrier for delivery to the Company as soon as
practicable following such date, this Warrant (or an indemnification
undertaking reasonably acceptable to the Company with respect to this Warrant
in the case of its loss, theft or destruction); provided, that if such Warrant
Shares are to be issued in any name other than that of the registered holder of
this Warrant, such issuance shall be deemed a transfer and the provisions of
Section 7 shall be applicable. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), a certificate
or certificates for the Warrant Shares so purchased, in such denominations as
may be requested by the holder hereof and registered in the name of, or as
directed by, the holder, shall be delivered at the Company's expense to, or as
directed by, such holder as soon as practicable, and in no event later than two
Business Days, after the Company's receipt of the Exercise Notice, the
Aggregate Exercise Price (or notice of a Cashless Exercise) and this Warrant
(or an indemnification undertaking with respect to this Warrant in the case of
its loss, theft or destruction). 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 2(e), the holder of
this Warrant 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 this Warrant as
required by clause (iii) above or the certificates evidencing such Warrant
Shares.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five Business Days after any exercise
and at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which such Warrant
is exercised.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock
issued upon exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) If the Company shall fail to issue to the holder of this
Warrant on or before the date which is five Business Days after the Company's
receipt of a Exercise Notice, the Aggregate Exercise Price (or notice of a
Cashless Exercise) and this Warrant (or an indemnification
5
undertaking reasonably acceptable to the Company with respect to this Warrant
in the case of its loss, theft or destruction) (the "Warrant Delivery Date"), a
certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant pursuant to Section 2(a) or
a new Warrant for the number of shares of Common Stock to which such holder is
entitled pursuant to Section 2(b) hereof, the Company shall, in addition to any
other remedies under this Warrant or the Securities Purchase Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day after the Warrant Delivery Date that the issuance of such
Common Stock certificate or new Warrant, as the case may be, is not effected
an amount equal to 0.5% 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/or, the number of shares represented by the portion of
this Warrant which is not being converted, as the case may be, and (B) the
average of the Closing Sale Price of the Common Stock for the three consecutive
Business Days immediately preceding the last possible date which the Company
could have issued such Common Stock or Warrant, as the case may be, to the
holder without violating this Section 2.
(e) If, despite the Company's obligations provided in the
Securities Purchase Agreement and the Registration Rights Agreement, the
Warrant Shares to be issued are not registered and available for resale
pursuant to a registration statement in accordance with the Registration Rights
Agreement, then notwithstanding anything contained herein to the contrary, the
holder of this Warrant may, at its election exercised in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the number of shares of Common Stock determined according to the
following formula (a "Cashless Exercise"):
Net Number = A x (B - C)
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B
For purposes of the foregoing formula:
A = the total number shares with respect to which
this Warrant is then being exercised.
B = the Closing Sale Price of the Common Stock on
the date immediately preceding the date of the
Subscription Notice delivered in connection
with such exercise.
C = the Warrant Exercise Price then in effect at
the time of such exercise.
Section 3. Covenants as to Common Stock. The Company hereby covenants
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and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for
or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
6
(b) All Warrant Shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved 100% of the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder
of this Warrant in order to protect the exercise privilege of the holder of
this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. The Company (i) will not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant
above the Warrant Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which may be
-----
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
---------------------------------------
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder 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
7
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Warrant of
the Warrant Shares which he or she is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on such holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder.
-------------------------
(a) The holder of this Warrant, by the acceptance hereof,
represents that it is acquiring this Warrant and the Warrant Shares for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution of this Warrant or the Warrant
Shares, except pursuant to sales registered or exempted under the Securities
Act; provided, however, that by making the representations herein, the holder
does not agree to hold this Warrant or any of the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor").
(b) Upon exercise of this Warrant, except pursuant to a Cashless
Exercise, the holder shall confirm, which confirmation shall be deemed to be
made by delivery of an Exercise Notice, (i) that the Warrant Shares so
purchased are being acquired its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
of the Warrant Shares, except pursuant to sales registered or exempted under
the Securities Act; provided, however, that by making such representation, the
holder does not agree to hold any of the Warrant Shares for any minimum or
other specific term and reserves the right to dispose of the Warrant Shares at
any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act and (ii) such holder is an Accredited
Investor.
Section 7. Section Ownership and Transfer.
------------------------------
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall not be
assignable by the holder hereof without the prior written consent of the
8
Company; provided, however, that this Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, to a Permitted Transferee
(as defined below) without the consent of the Company, which consent shall not
be unreasonably withheld, upon surrender of this Warrant, together with a
properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 7(c) below. A "Permitted Transferee" shall
mean (i) a Buyer (as defined in the Securities Purchase Agreement), (ii) an
Affiliate (as such term is defined in Rule 501(b) under the Securities Act) of
a Buyer, (iii) any holder of Preferred Shares or warrants issued pursuant to
the Securities Purchase Agreement and (iv) any Affiliate of a holder of
Preferred Shares or warrants issued pursuant to the Securities Purchase
Agreement.
(c) The holder of this Warrant understands that this Warrant has
not been and is not expected to be, registered under the Securities Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) such holder
shall have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that the securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration; provided that (i) any sale of such securities
made in reliance on Rule 144 promulgated under the Securities Act may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (ii)
neither the Company nor any other person is under any obligation to register
the Warrants under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
Section 8. Adjustment of Warrant Exercise Price, Initial Warrant
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Exercise Price and Number of Shares. The Warrant Exercise Price, the
- -----------------------------------
Initial Warrant Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment of Warrant Exercise Price, Initial Warrant Exercise
Price and Number of Shares upon Issuance of Common Stock. If and whenever on
or after the date of issuance of this Warrant, the Company issues or sells, or
in accordance with Section 8(b) 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 an Approved Stock
Plan or Excluded Securities or upon exercise or conversion of the Other
Securities) for a consideration per share less than a price (the "Applicable
Price") equal to the Closing Sale Price of the Common Stock on the date of such
issue or sale, then immediately after such issue or sale the Warrant Exercise
Price and/or the Initial Warrant Exercise Price, as applicable, then in effect
shall be reduced to an amount equal to the product of (x) the Warrant Exercise
Price or the Initial Warrant Exercise Price, as applicable, in effect
immediately prior to such issue or sale and (y) the quotient determined by
dividing (1) the sum of (I) the product derived by multiplying the Applicable
Price by the number of shares of Common Stock Deemed Outstanding immediately
prior to
9
such issue or sale, plus (II) the consideration, if any, received by the
Company upon such issue or sale, by (2) the product derived by multiplying the
(I) Applicable Price by (II) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale. Upon each such adjustment of
the Warrant Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment. Notwithstanding anything to the contrary in this Section
8(a), no adjustment to the Warrant Exercise Price or the Initial Warrant
Exercise Price shall be required to be made pursuant to this Section 8(a)
unless such adjustment would result in a decrease in the Warrant Exercise Price
and/or the Initial Warrant Exercise Price, as the case may be, of at least 2.5%
of the Warrant Exercise Price or the Initial Warrant Exercise Price, as
applicable, on the date of issuance of this Warrant; provided that any
adjustments which by reason of this sentence are not required to be made at a
certain time shall be carried forward and taken into account and applied in any
subsequent adjustment. For purposes of this Section 8(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 Common
Stock is issuable upon the exercise of any such Option or upon conversion 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 this Section 8(a)(i), the "lowest price per share for which one
share of Common Stock is issuable upon exercise of such Options or upon
conversion 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 Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon conversion or exchange
of any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price and/or the Initial Warrant Exercise
Price, as applicable, shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities. Notwithstanding the foregoing, no adjustment
shall be made pursuant to this Section 8(a)(i) to the extent that such
adjustment is based solely on the fact that the Convertible Securities issuable
upon exercise of such Option are convertible into or exchangeable for Common
Stock at a price which varies with the market price of the Common Stock.
(ii) Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion 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 8(a)(ii), the "lowest
price per share for which one share of Common Stock is issuable upon such
conversion 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 Common Stock upon the issuance
10
or sale of the Convertible Security and upon conversion or exchange of such
Convertible Security. No further adjustment of the Warrant Exercise Price
and/or the Initial Warrant Exercise Price, as applicable, shall be made upon
the actual issuance of such Common Stock upon conversion 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 the
Warrant Exercise Price and/or the Initial Warrant Exercise Price, as
applicable, had been or are to be made pursuant to other provisions of this
Section 8(a), no further adjustment of the Warrant Exercise Price and/or the
Initial Warrant Exercise Price, as applicable, shall be made by reason of such
issue or sale. Notwithstanding the foregoing, no adjustment shall be made
pursuant to this Section 8(a)(ii) to the extent that such adjustment is based
solely on the fact that such Convertible Securities are convertible into or
exchangeable for Common Stock at a price which varies with the market price of
the Common Stock.
(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 or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Warrant Exercise
Price and/or the Initial Warrant Exercise Price, as applicable, in effect at
the time of such change shall be adjusted to the Warrant Exercise Price and/or
the Initial Warrant Exercise Price, as applicable, which would have been in
effect at such time had such Options or Convertible Securities provided for
such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and the
number of shares of Common Stock acquirable hereunder shall be correspondingly
readjusted. For purposes of this Section 8(a)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of issuance of this
Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Warrant Exercise Price or the
Initial Warrant Exercise Price, as applicable, then in effect.
(iv) Calculation of Consideration Received. In case any
-------------------------------------
Option 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 Options by the parties thereto, the
Options will be deemed to have been issued for a consideration of $.01. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the average of the Closing Bid Price of such securities for
the twenty (20) consecutive Business Days immediately preceding the date of
receipt. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business
of the
11
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the holders of Warrants representing a majority of the shares of
Common Stock obtainable upon exercise of the Warrants then outstanding. 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 Business Days after
the tenth (10th) day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the holders of Warrants
representing a majority of the shares of Common Stock obtainable upon exercise
of the Warrants then outstanding. The determination of such appraiser shall be
final and binding upon all parties and the fees and expenses of such appraiser
shall be borne by the Company.
(v) Record Date. If the Company takes a record of the
-----------
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(b) Adjustment of Warrant Exercise Price and Initial Warrant
--------------------------------------------------------
Exercise Price upon Subdivision or Combination of Common Stock. If the
- --------------------------------------------------------------
Company at any time after the date of issuance of this Warrant subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Warrant Exercise Price and/or the Initial Warrant Exercise Price,
as applicable, in effect immediately prior to such subdivision will be
proportionately reduced and the number of shares of Common Stock obtainable
upon exercise of this Warrant will be proportionately increased. If the
Company at any time after the date of issuance of this Warrant combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Warrant
Exercise Price and/or the Initial Warrant Exercise Price, as applicable, in
effect immediately prior to such combination will be proportionately increased
and the number of shares of Common Stock obtainable upon exercise of this
Warrant will be proportionately decreased.
(c) Distribution of Assets. If the Company shall declare or
----------------------
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in each
such case:
(i) the Warrant Exercise Price and the Initial Warrant
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive the Distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying such Warrant
Exercise Price and/or the Initial Warrant Exercise Price, as applicable, by a
fraction of which (A) the numerator shall be the Closing
12
Bid Price on the Business Day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company's Board
of Directors) applicable to one share of Common Stock, and (B) the denominator
shall be the Closing Bid Price on the Business Day immediately preceding such
record date; and
(ii) either (A) the number of Warrant Shares obtainable upon
exercise of this Warrant shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i), or (B) in the event
that the Distribution is of common stock of a company whose common stock is
traded on a national securities exchange or a national automated quotation
system, then the holder of this Warrant shall receive an additional warrant to
purchase Common Stock, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the amount of the
assets that would have been payable to the holder of this Warrant pursuant to
the Distribution had the holder exercised this Warrant immediately prior to
such record date and with an exercise price equal to the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding clause (i).
(d) Certain Events. If any event occurs of the type
--------------
contemplated by the provisions of paragraphs (a), (b) and (c) of this Section 8
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 Warrant Exercise Price and the number of
shares of Common Stock obtainable upon exercise of this Warrant so as to
protect the rights of the holder of this Warrant; provided that no such
adjustment will increase the Warrant Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 8.
(e) One-Year Adjustment of Warrant Exercise Price. In addition
---------------------------------------------
to any other adjustment to the Warrant Exercise Price provided for in this
Warrant, the Warrant Exercise Price shall be subject to the following
adjustment. In the event that 110% of the Market Price of the Common Stock on
the date which is one (1) year after the Issuance Date (the "One-Year
Adjustment Date") is less than the Warrant Exercise Price in effect on the date
immediately preceding the One-Year Adjustment Date, then from and after the
One-Year Adjustment Date, the Warrant Exercise Price shall be equal to the
greater of (A) 60.0% of the Initial Warrant Exercise Price on the date
immediately preceding the One-Year Adjustment Date (subject to appropriate
adjustment pursuant to Section 8(a)) and (B) 110% of the Market Price on the
One-Year Adjustment Date; subject to further adjustment as provided in this
Warrant. Notwithstanding the foregoing, no adjustment to the Warrant Exercise
Price shall be made pursuant to this Section 8(e) if prior to the One-Year
Adjustment Date there occurs a Company's Election Conversion Date (as defined
in the Certificate of Designations) on which date all outstanding Preferred
Shares are converted.
13
(f) Notices.
-------
(i) Promptly after any adjustment of the Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail, and certifying, the calculation of
such adjustment.
(ii) The Company will give written notice to the holder of
this Warrant at least ten (10) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined below), dissolution or
liquidation, provided that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder;
provided that if such information has not been made known to the public and in
the good faith opinion of the Board of Directors of the Company it is not in
the best interest of the Company to disclose such information, then the Company
shall not be required to give the notice provided for in this Section 8(f)(ii)
until the earlier of the date on which the Company publicly releases such
information and the date on which the Board of Directors no longer believes
that in the good faith opinion of the Board of Directors such information
should not be disclosed.
(iii) The Company will also give written notice to the holder
of this Warrant at least ten (10) days prior to the date on which any Organic
Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder; provided that if such information
has not been made known to the public and in the good faith opinion of the
Board of Directors of the Company it is not in the best interest of the Company
to disclose such information, then the Company shall not be required to give
the notice provided for in this Section 8(f)(iii) until the earlier of the date
on which the Company publicly releases such information and the date on which
the Board of Directors no longer believes that in the good faith opinion of the
Board of Directors such information should not be disclosed.
Section 9. Purchase Rights; Reorganization, Reclassification,
--------------------------------------------------
Consolidation, Merger or Sale.
- -----------------------------
(a) In addition to any adjustments pursuant to Section 8 above, if
at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the "Purchase
Rights"), then the holder of this Warrant will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise
14
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of this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") written agreement (in form and substance
satisfactory to the holders of Warrants representing a majority of the shares
of Common Stock obtainable upon exercise of the Warrants then outstanding) to
deliver to each holder of Warrants in exchange for such Warrants, a security of
the Acquiring Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant and satisfactory to the holders of the
Warrants (including, an adjusted warrant exercise price equal to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of the Warrants, if the value so reflected is less
than the Warrant Exercise Price in effect immediately prior to such
consolidation, merger or sale). Prior to the consummation of any other Organic
Change, the Company shall make appropriate provision (in form and substance
satisfactory to the holders of Warrants representing a majority of the shares
of Common Stock obtainable upon exercise of the Warrants then outstanding) to
insure that each of the holders of the Warrants will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the exercise of such holder's Warrants, such shares of stock, securities or
assets that would have been issued or payable in such Organic Change with
respect to or in exchange for the number of shares of Common Stock which would
have been acquirable and receivable upon the exercise of such holder's Warrant
as of the date of such Organic Change (without taking into account any
limitations or restrictions on the exerciseability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking in a form reasonably acceptable to the
Company, issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
------
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
15
If to the Company:
eFax.com, Inc.
1378 Willow Road
Menlo Park, California 94025
Telephone: 650-688-6810
Facsimile: 650-470-6969
Attention: Todd J. Kenck, Chief Financial Officer
With copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Telephone: 650-843-5000
Facsimile: 650-857-0663
Attention: Patrick A. Pohlen, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Investors to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of
Investors, or at such other address and facsimile as shall be delivered to the
Company upon the issuance or transfer of this Warrant. Each party shall
provide ten days' prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
Section 12. Amendments. This Warrant and any term hereof may be
----------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought.
Section 13. Date. The date of this Warrant is May 13, 1999 (the
----
"Issuance Date"). This Warrant, in all events, shall be wholly void and of no
effect after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 7 shall
continue in full force and effect after such date as to any Warrant Shares or
other securities issued upon the exercise of this Warrant.
Section 14. Amendment and Waiver. Except as otherwise provided herein,
--------------------
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants then outstanding; provided that no
such action may increase the Warrant Exercise Price of the Warrants or
16
decrease the number of shares or class of stock obtainable upon exercise of any
Warrants without the written consent of the holder of such Warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive
-----------------------------------
headings of the several sections and paragraphs of this Warrant are inserted
for convenience only and do not constitute a part of this Warrant. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by the internal laws of the State of
California, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of California or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California.
* * * * * * *
EFAX.COM, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
17
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
EFAX.COM, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of eFax.com,
Inc., a Delaware corporation (the "Company"), evidenced by the attached Warrant
(the "Warrant"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of the
Warrant Exercise Price shall be made as:
____________ a "Cash Exercise" with respect to
_______________________ Warrant Shares; and/or
____________ a "Cashless Exercise" with respect to
___________________ Warrant Shares (to the extent
permitted by the terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the 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.
4. Confirmation of Representations. Delivery of this notice to the
Company shall constitute confirmation and a representation by the undersigned
holder of the representations set forth in Section 6(b) of the Warrant.
Date: _______________ __, ______
___________________________________
Name of Registered Holder
By:________________________________
Name:
Title:
i
EXHIBIT B TO WARRANT
--------------------
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of eFax.com, Inc., a Delaware
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ______________, attorney to transfer
the warrants of said corporation, with full power of substitution in the
premises.
Dated: _______________ __, ______
________________________________
By: ____________________________
Its: ___________________________
____________________________________
By: _____________________________
Its: ____________________________
ii