NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE
OPINION OF COUNSEL FOR THE COMPANY, IS AVAILABLE.
Void after 5:00 P.M. New York City time on the last day of the Exercise Period,
as defined in the Warrant
COMMON STOCK PURCHASE WARRANT
OF
OTHNET, INC.
This is to certify that, FOR VALUE RECEIVED, __________________
("Holder"), is entitled to purchase, subject to the provisions of this warrant
("Warrant"), from Othnet, Inc., a Delaware corporation (the "Company"), at an
exercise price per share equal to 140% of the conversion price of the Company's
Series B Preferred Stock, subject to adjustment as provided in this Warrant (the
"Warrant Exercise Price"), ______________ (_____) shares of common stock, par
value $0.001 per share ("Common Stock"). The shares of Common Stock deliverable
upon such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant Shares." 1. ISSUANCE OF WARRANT. This Warrant is being
issued pursuant to that certain Subscription Agreement dated as of the date
hereof between the Company and the Holder (the "Subscription Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Subscription Agreement. In addition, the following terms
have the meanings set forth below:
"Closing Price" means, as of any date, the last trading price for the
Common Stock as reported by the NASD OTC Bulletin Board, or other principal
exchange or electronic trading system on which the shares of Common Stock are
quoted or traded.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities, which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Exercise Period" shall mean the period commencing on the date
hereof and ending at 5 p.m., Eastern Time on _____________, 2010 [five years
from date of issuance].
"Permitted Issuances" shall mean (i) Common Stock issued pursuant to
a stock split or subdivision, (ii) Common Stock issuable or issued to employees,
consultants or directors of the Company directly or pursuant to a stock plan or
other compensation arrangement approved by the Board of Directors of the Company
at the then fair market value, (iii) capital stock, debt instruments convertible
into capital stock or warrants or options to purchase capital stock issued in
connection with bona fide acquisitions, mergers, purchases, corporate partnering
agreements, joint ventures or similar transactions, the terms of which are
approved by the Board of Directors of the Company, and (iv) Common Stock issued
or issuable upon conversion of the Warrants or any other securities exercisable
or exchangeable for, or convertible into shares of Common Stock outstanding as
of January 5, 2005.
"Placement" means the private placement by the Company of up to
$4,000,000 worth of Units consisting of shares of the Company's Series B
Convertible Preferred Stock and Warrants, including this Warrant.
"Redemption Conditions" means each of the following conditions to a
redemption of this Warrant by the Company : (i) the closing price per share of
Common Stock, or the average of the closing bid and ask price per share of
Common Stock, if applicable, has been at least 200% of the Warrant Exercise
Price (as adjusted for any stock splits, combinations or other
recapitalizations) for thirty (30) consecutive trading days ending on the date
of the Redemption Notice (hereinafter defined) (the "Redemption Measuring
Period"), (ii) the average daily trading volume of the Company's Common Stock as
reported on the OTC Bulletin Board ("OTCBB") or other electronic quotation
system or stock exchange as then listed, averages at least 2,000,000 shares of
Common Stock per day for thirty (30) consecutive trading days prior to a
Redemption Notice (as hereinafter defined), (iii) the resale of the shares of
Common Stock issuable upon exercise of this Warrant is registered with the
Securities and Exchange Commission (the "SEC") for resale to the public under an
effective registration statement and all such shares remain registered
thereafter until redemption, and (iv) the Company's Common Stock is quoted on
the OTCBB or a similar electronic quotation system or stock exchange on the date
of the Redemption Notice.
2. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
at any time or from time to time from the date hereof until the end of the
Exercise Period by presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of the
Warrant Exercise Price for the number of shares of Common Stock specified in
such form. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance of
the shares of Common Stock purchasable hereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. As soon as practicable after each
exercise of this Warrant, in whole or in part, and in any event within seven (7)
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder hereof or, subject to Section 6 hereof, as the Holder (upon payment
by the Holder of any applicable transfer taxes) may direct a certificate or
certificates (with appropriate restrictive legends, as applicable) for the
number of duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock to which the Holder shall be entitled upon exercise plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
all issuances of Common Stock shall be rounded up to the nearest whole share.
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3. RESERVATION OF SHARES/FRACTIONAL SHARES. The Company hereby agrees that
at all times there shall be reserved for issuance and/or delivery upon exercise
of this Warrant such number of shares of Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant. No fractional shares or
script representing fractional shares shall be issued upon the exercise of this
Warrant. Instead, the Company will round up to the nearest whole share.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other Warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company or at the office of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof at the office of the Company or at the office of its stock transfer
agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor. Any such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not
this Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
5. RIGHTS AND OBLIGATIONS OF THE HOLDER. The Holder shall not, by virtue
of this Warrant, be entitled to any rights of a stockholder in the Company,
either at law or equity, and the rights of the Holder are limited to those
expressed in the Warrant and are not enforceable against the Company except to
the extent set forth herein. In addition, no provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of such Holder for the purchase price of any Common Stock or as
a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
6. ANTI-DILUTION PROVISIONS. The Warrant Exercise Price in effect at any
time and the number and kind of securities purchasable upon exercise of each
Warrant shall be subject to adjustment as follows and the Company shall give
each Holder notice of any event described below which requires an adjustment
pursuant to this Section 6 at the time of such event:
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(a) Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,
(ii) subdivide or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(iii) combine or reclassify its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or otherwise effect a
reverse stock split,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event, or the record date therefor,
whichever is earlier, would own or be entitled to receive after the happening of
such event, and (ii) the Warrant Exercise Price(s) shall be adjusted to equal
(A) the Warrant Exercise Price immediately prior to such event multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
(b) Certain Other Distributions and Adjustments.
(i) If at any time the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive any
dividend or other distribution of:
(A) cash,
(B) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever (other than
Convertible Securities or shares of Common Stock), or
(C) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than Convertible
Securities or shares of Common Stock),
then, upon exercise of this Warrant, Holder shall be entitled to receive such
dividend or distribution with respect to the amount of Common Stock received on
such exercise, and, if such dividend or distribution shall have been securities,
any property subsequently distributed with respect thereto. However, in the
event that at the time the Company has taken a record of the holders of its
Common Stock for the purposes described above: (i) the resale of the shares of
Common Stock issuable upon exercise of this Warrant is not registered with the
SEC for resale to the public under an effective registration statement; and (ii)
the Common Stock issuable upon exercise of this Warrant is not quoted on the
OTCBB or a similar electronic quotation system or stock exchange, Holder shall
be entitled to receive such dividend or distribution as if Holder had exercised
this Warrant.
4
(ii) A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock and in such event, upon exercise of
this Warrant, Holder shall be entitled to receive such distribution with respect
to the amount of Common Stock received on such exercise, and, if such dividend
or distribution shall have been securities, any property subsequently
distributed with respect thereto, and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 6(a). However, in the event that at the time the
Company has reclassified its Common Stock, as described above: (i) the resale of
the shares of Common Stock issuable upon exercise of this Warrant is not
registered with the SEC for resale to the public under an effective registration
statement; and (ii) the Common Stock issuable upon exercise of this Warrant is
not quoted on the OTCBB or a similar electronic quotation system or stock
exchange, Holder shall be entitled to receive such distribution, and, if such
dividend or distribution shall have been securities, any property subsequently
distributed with respect thereto, as if Holder had exercised this Warrant.
(c) Issuance of Additional Shares of Common Stock.
(i) If, at any time prior to the exercise of the Warrants the
Company shall issue or sell any shares of Common Stock in exchange for
consideration in an amount per share of Common Stock less than the Convertible
Preferred Stock Conversion Price, as defined in the Company's Series A
Convertible Preferred Stock and Series B Convertible Preferred Certificate of
Designation (the "Discounted Price," each such sale or issuance a "Discounted
Price Transaction" and the number of shares sold or issued in such Discounted
Price Transaction the "Discounted Sale Volume"), other than Permitted Issuances,
then (A) the Warrant Exercise Price then in effect shall be adjusted so that it
shall equal the price determined by multiplying the Warrant Exercise Price in
effect immediately prior to such event by a fraction, of which the numerator
shall be the sum of the amount of Common Stock outstanding immediately before
such Discounted Price Transaction, plus the quotient obtained by dividing the
total proceeds of such Discounted Price Transaction by such Convertible
Preferred Stock Conversion Price, and of which the denominator shall be the
amount of Common Stock outstanding immediately following such exercise (for
purposes of determining the amount of Common Stock outstanding, all outstanding
securities exercisable for or convertible into Common Stock shall be deemed to
have been so exercised or converted), and (B) the number of shares of Common
Stock for which this Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the Warrant Exercise Price in effect immediately
prior to such Discounted Price Transaction by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such Discounted
Price Transaction and dividing the product thereof by the Warrant Exercise Price
resulting from the adjustment made pursuant to clause (A) above.
5
(ii) The provisions of paragraph (i) of this Section 6(c)
shall not apply to any issuance of shares of Common Stock for which an
adjustment is provided under Section 6(a) or 6(b). No adjustment of the number
of shares of Common Stock for which this Warrant shall be exercisable shall be
made under paragraph (i) of this Section 6(c) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or
upon the issuance of such Convertible Securities (or upon the issuance of any
warrant or other rights therefor) pursuant to Section 6(d) or Section 6(e).
(d) Issuance of Warrants or Other Rights. If at any time the Company
shall: (i) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or (ii) in any manner issue or
sell, any warrants or other rights to subscribe for or purchase any shares of
Common Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such warrants or
other rights or upon conversion or exchange of such Convertible Securities shall
be less than the Warrant Exercise Price, then the number of shares for which
this Warrant is exercisable and the Warrant Exercise Price shall be adjusted as
provided in Section 6(c) on the basis that the maximum number of shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Company shall be deemed to
have received all the consideration payable therefor, if any, as of the date of
issuance of such warrants or other rights. No further adjustment of the Warrant
Exercise Price(s) shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants or other rights or
upon the actual issuance of such Common Stock upon such conversion or exchange
of such Convertible Securities.
(e) Issuance of Convertible Securities. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Warrant Exercise Price, then the number of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Exercise Price shall be adjusted as provided in Section 6(c) on the basis that
the maximum number of shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of issuance of such
Convertible Securities. If any issue or sale of Convertible Securities is made
upon exercise of any warrant or other right to subscribe for or to purchase any
such Convertible Securities for which adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Exercise
Price have been or are to be made pursuant to Section 6(d), no further
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Exercise Price shall be made by reason of such
record, issue or sale.
6
(f) Superseding Adjustment. If at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Warrant Exercise Price(s) shall have been made pursuant to Section 6(d) or
Section 6(e) as the result of any issuance of warrants, rights or Convertible
Securities,
(i) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or a
portion of such warrants or rights, or the right of conversion or exchange with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the shares of Common Stock which were deemed to have been
issued by virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by virtue
of such computation made in connection with the adjustment so rescinded and
annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a re-computation shall be made of the effect of such
rights or options or other Convertible Securities on the basis of:
(A) treating the number of shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of conversion
or exchange, as having been issued on the date or dates of any such exercise and
for the consideration actually received and receivable therefor, and
(B) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which shares of Common Stock or other property are
issuable under such warrants or rights or other convertible Securities;
whereupon a new adjustment of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Exercise Price(s) shall be made,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled.
(g) No adjustment in the Warrant Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($0.01) in such price; provided, however, that any adjustments which by
reason of this Section 6(g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 6(g) shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be.
(h) The Company may retain a firm of independent public accountants
of recognized standing selected by the Board (who may be the regular accountants
employed by the Company) to make any computation required by this Section 6.
7
(i) In the event that at any time, as a result of an adjustment made
pursuant to Section 6(a), (b) or (c) of this Warrant, the Holder of any Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Sections 6(a) through (h), inclusive,
of this Warrant.
(j) Notwithstanding the foregoing, no adjustment shall be effected
due to, or as a result of, any Permitted Issuances.
(k) Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock,
other than any action described in this Section 6, then, unless such action will
not have a materially adverse effect upon the rights of the Holders, the number
of shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
7. REDEMPTION.
(a) Redemption Option. Upon the satisfaction of the Redemption
Conditions, the Company may, at the option of its Board of Directors at any time
following the Final Closing redeem all (but not less than all) of the Warrants,
out of funds legally available therefor by paying the Redemption Price (as
hereafter defined) in cash for each Warrant then redeemed.
(b) Redemption Price. The Redemption Price under this Section 7
shall be $0.01 per Warrant, subject to adjustment for any stock split, stock
dividend, recapitalization, combination or adjustment after the date hereof.
(c) Notice. Notice of any proposed redemption of the Warrants
pursuant to this Section 7 shall be given by the Company by sending by certified
mail, postage prepaid, a copy of such notice (the "Redemption Notice") at least
30 days prior to the date on which it proposes to redeem the Warrants (the
"Redemption Date") to the holders of the Warrants including the Holder or any
subsequent holder(s) of record of this Warrant, at their respective addresses
appearing on the books of the Company or given by such holder(s) to the Company
for the purposes of notice, or if no such address appears or is given, at the
principal office of the Company. Such notice shall state the Redemption Date to
which such notice relates, the number of Warrants to be redeemed from all
holders thereof and from the Holder of this Warrant, the Redemption Price per
Warrant, the record date for purposes of such redemption and the date on which
such holders' right to exercise the Warrants will terminate, and shall call upon
the Holders to surrender to the Company on said Redemption Date at the place
designated in the notice such holder's certificate or certificates representing
the Warrants to be redeemed unless exercised prior to such date.
(d) Payment. On the Redemption Date, the funds legally available for
redemption of the Warrants shall be used to redeem the Warrants from the holders
thereof at the Redemption Price and the Company shall be obligated to pay the
holder(s) the Redemption Price of the Warrants to the extent they have not been
exercised as of such date.
8
(e) Redemption Procedures. On or after a Redemption Date, the Holder
shall surrender this Warrant to the Company, or its agent, at the place
designated in the aforesaid notice and shall thereupon be entitled to receive
payment of the Redemption Price therefor. Upon payment of the Redemption Price
each surrendered Warrant shall be cancelled.
(f) Termination of Rights. Notwithstanding that the Warrants so
called for redemption shall not have been surrendered, from and after the
Redemption Date, all rights of the Holder of this Warrant and all other holders
of Warrants shall forthwith cease and terminate, except for right of the Holder
to receive payment of the Redemption Price upon surrender of this Warrant.
9
8. OFFICER'S CERTIFICATE. Whenever the Warrant Exercise Price(s) shall be
adjusted as required by the provisions of Section 6 of this Warrant, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Warrant Exercise Price(s) and the adjusted
number of shares of Common Stock issuable upon exercise of each Warrant,
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner of computing such adjustment. Each such
officer's certificate shall be forwarded to Holder as provided in Section 13.
9. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (1) if the Company shall pay any dividend or make any distribution
upon Common Stock, or (2) if the Company shall offer to the holders of Common
Stock for subscription or purchase by them any share of any class or any other
rights, or (3) if any capital reorganization of the Company, reclassification of
the capital stock of the Company, consolidation or merger of the Company with or
into another entity, tender offer transaction for the Company's Common Stock,
sale, lease or transfer of all or substantially all of the property and assets
of the Company, or voluntary or involuntary dissolution, liquidation or winding
up of the Company shall be effected, or (4) if the Company shall file a
registration statement under the Securities Act of 1933, as amended (the "Act"),
on any form other than on Form S-4 or S-8 or any successor form, then in any
such case, the Company shall cause to be mailed by certified mail to the Holder,
at least ten days prior to the date specified in clauses (1), (2), (3) or (4),
as the case may be, of this Section 9 a notice containing a brief description of
the proposed action and stating the date on which (i) a record is to be taken
for the purpose of such dividend, distribution or rights, or (ii) such
reclassification, reorganization, consolidation, merger, tender offer
transaction, conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up, or (iii) such registration
statement is to be filed with the SEC.
10. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing or surviving corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance of all or
substantially all of the assets of the Company, the Company shall, as a
condition precedent to such transaction, cause effective provisions to be made
so that (i) the Holder shall have the right thereafter by exercising this
Warrant, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, capital reorganization and
other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock which could have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance, and (ii) the successor or acquiring
entity shall expressly assume the due and punctual observance and performance of
each covenant and condition of this Warrant to be performed and observed by the
Company and all obligations and liabilities hereunder (including but not limited
to the provisions of Section 3 regarding the increase in the number of shares of
Warrant Shares potentially issuable hereunder). Any such provision shall include
provision for adjustments which shall be as nearly equivalent as possible to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section 10 shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. In the event that in connection
with any such capital reorganization or reclassification, consolidation, merger,
sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole in part, for a security
of the Company other than Common Stock, any such issue shall be treated as an
issuance of Common Stock covered by the provisions of Section 6 of this Warrant.
10
11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant or
the Warrant Shares or any other security issued or issuable upon exercise of
this Warrant may not be sold or otherwise disposed of except as follows:
(i) to a person who, in the opinion of counsel for the Company, is a
person to whom this Warrant or Warrant Shares may legally be transferred without
registration and without the delivery of a current prospectus under the Act with
respect thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section 11 with respect to any resale or
other disposition of such securities which agreement shall be satisfactory in
form and substance to the Company and its counsel; or
(ii) to any person upon delivery of a prospectus then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.
12. GOVERNING LAW; JURISDICTION. The corporate laws of the State of
Delaware shall govern all issues concerning the relative rights of the Company
and its stockholders. All issues concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof. The parties hereto
agree that venue in any and all actions and proceedings related to the subject
matter of this Warrant shall be in the state and federal courts in and for New
York, New York, which courts shall have exclusive jurisdiction for such purpose,
and the parties hereto irrevocably submit to the exclusive jurisdiction of such
courts and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such action or proceeding. Service of process may be made in
any manner recognized by such courts. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
13. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
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If to the Company: Othnet, Inc.
6100 Center Drive, Suite 900
Los Angeles, CA 90045
Attn: President
Tel: 310-426-8000 ; Fax: 310-426-8010
If to the Holder: To the Address Set Forth In the Records of the Company
With copies to: Maxim Group, LLC
405 Lexington Avenue
New York, N.Y. 10017
Facsimile No.: (212) 895-3783 Attn: Anthony Sarkis
14. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes
attributable to the issuance of shares of Common Stock underlying this Warrant
upon exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificate for shares of Common Stock underlying
this Warrant in a name other that of the Holder. The Holder is responsible for
all other tax liability that may arise as a result of holding or transferring
this Warrant or receiving shares of Common Stock underlying this Warrant upon
exercise hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Warrant has been duly executed as of ___________
___, 2005
OTHNET, INC.
By:
--------------------------------------
Name:
Title:
13
PURCHASE FORM
Dated: _____________, 200__
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing ______ shares of Common Stock and hereby makes
payment of $_________ in payment of the actual exercise price thereof. Schedule
1 attached hereto specifies the Warrant Shares from which the shares of Common
Stock are being purchased and the Warrant Exercise Price(s) for such shares.
----------------------------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
---------------------------------------------------------
(Please typewrite or print in block letters)
Signature:
----------------------------------------------------
Social Security or Employer Identification No.:
---------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns
and transfer unto:
Name:
---------------------------------------------------------
(Please typewrite or print in block letters)
Signature:
----------------------------------------------------
Social Security or Employer Identification No.:
---------------
The right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint attorney to transfer the same on the books of the Company
with full power of substitution.
Dated:_______________, 200_.
Signature:
------------------------------
Signature Guaranteed:
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