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EXHIBIT 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
WARRANT TO PURCHASE SERIES B PREFERRED STOCK
OF
NEXTRON COMMUNICATIONS, INC.
This Warrant (the "Warrant") is issued to Safeguard Scientifics, Inc.
or its registered assigns ("Holder") by Nextron Communications, Inc., a
California corporation (the "Company"), on 11/24, 1999 (the "Warrant Issue
Date") for the consideration stated in the Warrant Purchase Agreement ("Warrant
Purchase Agreement") dated of even date herewith, receipt of which is hereby
acknowledged.
1. Purchase Shares. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant
at the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing), to purchase from the Company
six-hundred twenty-five thousand (625,000) shares of Series B Preferred Stock
of the Company (the "Warrant Shares" or "Preferred Stock") at the Exercise
Price (defined below), subject to adjustment as provided in Section 8 below.
2. Exercise Price. The exercise price for the Warrant Shares shall
be $10.00 per Warrant Share, as adjusted from time to time pursuant to Section
8 hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or
in part, during the term commencing on the Warrant Issue Date and ending on the
earlier of (i) the fifth anniversary of the date hereof, (ii) 180 days after
the closing of the sale and issuance of Common Stock of the Company in a firmly
underwritten initial public offering, pursuant to an effective registration
under the Securities Act of 1933, as amended, with gross proceeds to the
Company of at least $10,000,000 (the "Initial Public Offering") or (iii)
immediately preceding a Change of Control. The term "Change of Control" shall
mean (a) the acquisition of the Company pursuant to a consolidation of the
Company with or merger of the Company with or into any other person in which
the Company is not the surviving corporation (other than a reincorporation);
(ii) the sale of all or substantially all of the assets of the Company to any
other person. In the event of a Change of Control, the Company shall provide
the Holder with thirty (30) days' prior written notice of the event
constituting the Change of Control. Further, in the event of a Change of
Control whereby (i) the consideration to be received by Holder in the event of
Change of Control in respect of the Series B Preferred Stock exceeds the
exercise price of the Warrant, and (ii) Holder has not notified the Company of
Holder's intent to exercise the Warrant within the 30 days' notice provision
contained in this Section 3, then, the Warrant shall be deemed automatically
exercised as of the closing of the event constituting the Change of Control
pursuant to provisions of Section 5 hereof.
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
affected by:
(a) the surrender of the Warrant, together with a duly
executed copy of the form of Notice of Exercise attached hereto, to the
Secretary of the Company at its principal offices; and
(b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Warrant Shares being
purchased.
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5. Net Exercise. In lieu of exercising this Warrant pursuant to Section
4, the Holder may elect to receive, without the payment by the Holder of any
additional consideration, Warrant Shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the Notice of Exercise attached
hereto indicating such election, in which event the Company shall issue to the
Holder hereof a number of Warrant Shares computed using the following formula:
Y(A - B)
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X = A
Where: X = The number of Warrant Shares to be issued to the
Holder pursuant to this net exercise;
Y = The number of Warrant Shares in respect of which the
net issue election is made;
A = The fair market value of one Warrant Share at the time
the net issue election is made;
B = The Exercise Price (as adjusted to the date of the net
issuance).
For purposes of this Section 5, the fair market value of one Warrant Share as of
a particular date shall be determined as follows: (i) if traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the closing price of the securities on such exchange on the date of the exercise
of the Warrants; (ii) if traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sale prices (whichever is applicable) over
the thirty (30) day period ending three (3) days prior to the net exercise; and
(iii) if there is no active public market, the value shall be the fair market
value thereof, as determined in good faith by the Board of Directors of the
Company; provided, that, if the Warrant is being exercised upon the closing of
the Initial Public Offering, the value will be the initial "Price to Public" of
the number of shares of Common Stock into which each Warrant Share is
convertible as specified in the final prospectus with respect to such offering.
6. Certificates for Shares. Upon the exercise of the purchase rights
evidenced by this Warrant, one or more certificates for the number of Warrant
Shares so purchased shall be issued as soon as practicable thereafter (with
appropriate restrictive legends, if applicable), and in any event within thirty
(30) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Warrant Shares,
when issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
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8. Adjustment of Exercise Price and Kind and Number of Shares. The number
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
shall at any time prior to the expiration of this Warrant (i) subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, (ii)
issue additional shares of its Common stock or other equity securities as a
dividend with respect to any shares of its Common Stock, or (iii) declare a
cash dividend with respect to any shares of its Common Stock, the number of
shares of Common Stock issuable on the exercise of this Warrant shall
forthwith be proportionately increased in the case of a subdivision or
stock or cash dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase
price payable per share, but the aggregate purchase price payable for the
total number of Warrant Shares purchasable under this Warrant (as adjusted)
shall remain the same. Any adjustment under this Section 8(a) shall become
effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend,
or in the event that no record date is fixed, upon the making of such
dividend.
(b) Reclassification, Reorganization and Consolidation. In case of
any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or
stock dividend provided for in Section 8(a) above), then, as a condition of
such reclassification, reorganization, or change, lawful provision shall be
made, and duly executed documents evidencing the same from the Company or
its successor shall be delivered to the Holder, so that the Holder shall
have the right at any time prior to the expiration of this Warrant to
purchase, at a total price equal to that payable upon the exercise of this
Warrant (subject to adjustment of the Exercise Price as provided in Section
8, the kind and amount of shares of stock and other securities and property
receivable in connection with such reclassification, reorganization, or
change by a Holder of the same number of shares of Common Stock as were
purchasable by the Holder immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be
made with respect to the rights and interest of the Holder so that the
provisions hereof shall thereafter be applicable with respect to any shares
of stock or other securities and property deliverable upon exercise hereof,
and appropriate adjustments shall be made to the purchase price per share
payable hereunder, provided the aggregate purchase price shall remain in
the same.
(c) Notice of Adjustment. When any adjustment is required to be made
in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Company shall promptly notify the Holder of
such event and of the number of shares of Common Stock or other securities
or property thereafter purchasable upon exercise of this Warrant.
(d) Conversion of Preferred Shares. Should all of the Preferred Stock
outstanding or any portion there outstanding at any time prior to the
expiration of this Warrant be converted into shares of Common Stock, then
this Warrant shall immediately be exercisable for that number of shares of
Common Stock equal to the number of shares of Common Stock that would have
been received if this Warrant had been exercised in full and the Preferred
Stock received thereupon had been simultaneously converted immediately
prior to such event, and the Exercise Price shall be immediately adjusted
to equal to the quotient maintained by dividing (x) the aggregate exercise
price of the maximum number of shares of Preferred Stock for which this
Warrant was exercisable immediately prior to such conversion by (y) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such conversion.
(e) Issuance of New Warrant. Upon the occurrence of any of the events
listed in this Section 8 that results in an adjustment of the type, number
or exercise price of the securities underlying this Warrant, the Holder
shall have the right to receive a new warrant reflecting such adjustment
upon the Holder tendering this Warrant in exchange. The new warrant shall
otherwise have terms identical to this Warrant.
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9. Covenants and Conditions.
(a) No Impairment. Pursuant to the terms and conditions of this
Warrant, Company shall: (i) reserve an appropriate number of shares of
Company's Common Stock to facilitate the issuance of Warrant Shares to Holder
pursuant to this Warrant, (ii) not amend its articles or take any other action
that would materially impair Company's ability to comply with the terms of the
Warrant or otherwise unfairly impair the rights of the Holder, and (iii)
provide Holder with reasonable notice before Company undertakes any significant
corporate action that would have a material impact upon Holder's rights under
the Warrant or upon the rights of the holders of Common Stock or Preferred Stock
generally.
(b) Registration Rights. The Company covenants that it will not
grant any registration rights to any holder of Preferred Stock of the Company
unless it grants equal rights to the Holder. In addition, if no registration
rights have been granted to any holder of equity securities upon the
consummation by the Company of an initial public offering, then the Company
shall grant to the Holder unlimited piggyback registration rights on customary
terms and conditions (including the Company's agreement to pay all expenses of
such registrations other than underwriting discounts).
10. Representations and Warranties. Pursuant to the terms and conditions
of this Warrant, Company represents and warrants that Company is: (i) properly
organized and structured pursuant to all applicable corporate laws of the State
of California, (ii) not in violation of any applicable laws, ordinances or
contracts, where such violation would have a material adverse effect on
Holder's rights under this Warrant, and (iii) under the belief that all
financial statements or other material representations made to Holder are
complete and accurate.
11. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
12. No Stockholder Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a stockholder with respect to the shares
of Preferred Stock issuable on the exercise hereof, including (without
limitation) the right to vote such shares of Preferred Stock, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such Holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 12 shall limit the right of the Holder to be provided
the Notices required under this Warrant.
13. Successors and Assignees. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
and their respective successors and assigns.
14. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or
in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder. Any waiver or amendment affected
in accordance with this Section shall be binding upon each holder of any shares
of Preferred Stock purchased under this Warrant at the time outstanding
(including securities into which such shares have been converted), each future
holder of all such shares, and the Company.
15. Notices. All notices required under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company
shall notify the Holder hereof in writing). Notices to the Holder shall be sent
to the address of the Holder on the books of the Company (or at such other
place as the Holder shall notify the Company hereof in writing).
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16. Attorneys' Fees. If any action at law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
17. Captions. The section and subsection headings of this Warrant
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
18. Governing Law. This Warrant shall be governed by the laws of
the State of California as applied to agreements among California residents
made and to be performed entirely within the State of California.
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IN WITNESS WHEREOF, Nextron Communications, Inc. caused this Warrant to be
executed by an officer thereunto duly authorized.
NEXTRON COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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Name:
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Address:
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Fax Number:
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NOTICE OF EXERCISE
To: _______________
The undersigned hereby elects to [check applicable subsection]:
_____ (a) Purchase ___________ shares of Series B Preferred Stock of
Nextron Communications, Inc., pursuant to the terms of the
attached Warrant and payment of the Exercise Price per share
required under such Warrant accompanies this notice;
OR
_____ (b) Exercise the attached Warrant for [all of the shares]
[______ of the Shares] [cross our inapplicable phrase] of Series
B Preferred Stock of Nextron Communications, Inc. purchasable
under the Warrant pursuant to the net exercise provisions of
Section 5 of such Warrant.
The undersigned hereby represents and warrants that the undersigned
is acquiring such shares for its own account for investment purposes only, and
not for resale or with a view to distribution of such shares or any part
thereof.
WARRANTHOLDER:
______________________________
By: _____________________
[NAME]
Address: ____________________
______________________________
______________________________
Date: ________________
Name in which shares should be registered:__________________