Warrant Agreement
Neither this Warrant nor the securities represented by this Warrant have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities laws. Neither this Warrant nor those securities may be offered for sale, sold, transferred, or assigned in the absence of an effective registration statement under the Securities Act and applicable state securities laws or an opinion of counsel, in form reasonably acceptable to the Corporation, that registration is not required under the Securities Act or under applicable state securities laws.
[Name of corporation]
Warrant to Purchase Shares of Common Stock
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Date of Issuance: [date] |
Number of Shares: [number] |
[Name of corporation], a Texas corporation (the “Corporation”), hereby certifies that, for ten United States dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [name of registered holder], the registered holder hereof, or his permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Corporation on surrender of this Warrant, at any time on or after the date of issuance, but not after 5:00 p.m. central time on the Expiration Date, [number] fully paid nonassessable shares of Common Stock (the “Warrant Shares”) at the Warrant Exercise Price.
A.Definitions
The following terms used in this Warrant will have the following meanings:
1.“Business Day” means any day that is not (a) a Saturday, (b) a Sunday, [or] (c) a day on which the banks in the state of Texas are required or authorized to be closed [, or (d) a day on which trading does not take place on the principal exchange or automated quotation system on which the Common Stock is traded].
2.“Common Stock” means (a) the Corporation’s common stock, par value $[amount] per share, and (b) any capital stock into which the Common Stock will have been changed or any capital stock resulting from a reclassification of Common Stock.
3.“Expiration Date” means the date that is [number] years from the date of this Warrant or, if that date falls on day that is not a Business Day, the next Business Day.
4.“Person” means an individual, a limited liability corporation, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, and a government or any department or agency thereof.
5.“Warrant” means this Warrant and all Warrants issued in exchange, transfer, or replacement of any thereof.
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Consult a tax adviser regarding the tax consequences to the corporation and to the individual of a stock option grant. |
6.“Warrant Exercise Price” will be $[amount] per Warrant Share.
B.Exercise of Warrant
1.Subject to the terms and conditions of this agreement, this Warrant may be exercised, in whole or in part, by the holder hereof then-registered on the books of the Corpora-tion at any time on any Business Day on or after the date of issuance of this Warrant and before 5:00 p.m. central time on the Expiration Date by (a) delivery of a written notice, in the form of the subscription notice attached hereto as Exhibit A (the “Exercise Notice”), of the holder’s election to exercise this Warrant, specifying the number of Warrant Shares to be purchased; (b) payment to the Corporation of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised (plus any applicable transfer taxes) (the “Aggregate Exercise Price”) in cash, by [certified/cashier’s] check, or by wire transfer to an account designated by the Corporation; and (c) the surrender to the Corporation or a prepaid common carrier for delivery to the Corporation, as soon as practicable following the date of exercise, of this Warrant (or an indemnification un-dertaking with respect to this Warrant in the case of its loss, theft, or destruction). If the Warrant Shares are to be issued in any name other than that of the registered holder of this Warrant, such issuance will be deemed a transfer and section G (regarding ownership and transfer) of this Warrant will be applicable. On any exercise in compliance with this section B(1), a certificate or certificates for the Warrant Shares purchased, in the denominations re-quested by the holder hereof and registered in the name of, or as directed by, the holder, will be delivered at the Corporation’s expense to, or as directed by, the holder as soon as practicable, but not later than ten Business Days after the Corporation’s receipt of the Exercise No-tice, the Aggregate Exercise Price, and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft, or destruction). On delivery of the Exer-cise Notice and Aggregate Exercise Price referred to in clause (b) above, the holder of this Warrant will 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 (c) above or the certificates evidencing such Warrant Shares.
2.Unless the rights represented by this Warrant have expired or have been fully exercised, the Corporation will as soon as practicable, but not later than ten Business Days after any exercise, and at its own expense, issue a new Warrant identical to this Warrant, except it will represent rights to purchase the number of Warrant Shares purchasable immediately before exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant was exercised.
3.No fractional shares of Common Stock are to be issued on the exercise of this Warrant. If necessary, the number of shares of Common Stock issued on exercise of this Warrant will be rounded up or down to the nearest whole number.
C.Representations and Covenants as to Common Stock
The Corporation covenants and agrees as follows:
1.This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant on issuance will be, duly authorized and validly issued.
2.All Warrant Shares issued on the exercise of the rights represented by this Warrant on issuance will be validly issued, fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issue thereof.
3.While the rights represented by this Warrant may be exercised, the Corporation will have authorized and reserved at least the number of shares of Common Stock issuable on the full exercise of the rights then represented by this Warrant, and the par value of those shares will be less than or equal to the applicable Warrant Exercise Price.
D.Taxes
The Corporation will pay any and all issue taxes (but not any transfer taxes) payable with respect to the issuance and delivery of Warrant Shares on exercise of this Warrant.
E.Warrant Holder Not Deemed a Shareholder
Except as otherwise specifically provided in this Warrant, the holder of this Warrant, as a holder, will not be entitled to vote, receive dividends, or be deemed the holder of shares of the Corporation for any purpose, nor will anything in this Warrant be construed to confer on the holder, as such, any of the rights of a shareholder of the Corporation, including, without limitation, any right to (1) vote, (2) give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance, or otherwise), (3) receive notice of meetings, or (4) receive dividends or subscription rights, or otherwise, before the issuance of the Warrant Shares to the holder on the due exercise of this Warrant. In addition, nothing in this Warrant will be construed as imposing any liabilities on the holder to purchase any securities (on exercise of this Warrant or otherwise) or any liabilities as a shareholder of the Corporation, whether such liabilities are asserted by the Corporation or by creditors of the Corporation.
F.Representations of Holder
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 toward, or for resale in connection with, any sale or distribution of this Warrant or the Warrant Shares in violation of the Securities Act. However, 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 time and reserves the right to dispose of this Warrant and the Warrant Shares at any time in accordance with a registration or an exemption from registration under the Securities Act.
G.Ownership and Transfer
1.The Corporation will maintain at its principal executive offices (or such other office or agency of the Corporation as it may designate by notice to the holder hereof) a register for this Warrant, in which the Corporation will 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 Corporation may treat the Person in whose name this Warrant is registered as the owner and holder hereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any transfers made under the terms of this Warrant.
2.This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, on surrender of this Warrant, together with a properly executed warrant power in the form of Exhibit B attached. Any transfer or assignment will be subject to the conditions in section G(3) of this Warrant.
3.The holder of this Warrant understands that this Warrant and the Warrant Shares have not been and are 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) the Warrant and the Warrant shares are subsequently registered thereunder or (b) the holder will have delivered to the Corporation an opinion of counsel, in form reasonably acceptable to the effect that the securities to be sold, assigned, or transferred may be sold, assigned, or transferred under an exemption from registration. Neither the Corporation nor any other Person is under any obligation to register the Warrants or any of the Warrant Shares under the Securities Act or any state securities laws.
H.Adjustment to the Shares
The Warrant Exercise Price and the number of Warrant Shares issuable on exercise of this Warrant will be adjusted from time to time as follows:
1.Adjustment of Warrant Exercise Price on Subdivision or Combination of Common Stock. If, at any time after the date of issuance of this Warrant, the Corporation subdivides its outstanding shares of Common Stock (by any stock split, stock dividend, recapitulation, or otherwise) into a greater number of shares, the Warrant Exercise Price in effect immediately before the subdivision will be proportionately reduced and the number of Warrant Shares on the exercise of this Warrant will be proportionately increased. If, at any time after the date of issuance of this Warrant, the Corporation combines its outstanding shares of Common Stock (by combination, reverse stock split, or otherwise) into a smaller number of shares, the Warrant Exercise Price in effect immediately before the combination will be proportionately increased and the number of Warrant Shares issuable on exercise of this Warrant will be proportionately decreased.
2.Reclassification, Exchange, Combinations, or Substitution. On any reclassification, exchange, substitution, or other event that results in a change of the number or class of the securities issuable on exercise of this Warrant, the holder of this Warrant will be entitled to receive, on exercise of this Warrant, the number and kind of securities and property that he would have received for the shares of Common Stock if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Corporation or its successor will promptly issue to the holder a new Warrant for such new securities or other property. The new Warrant will provide for adjustments that will be as nearly equivalent as may be practicable to the adjustments provided for in this section H including, without limitation, adjustments to the Warrant Exercise Price and to the number of securities or property issuable on exercise of the new Warrant. The provisions of this section H(2) will apply similarly to successive reclassifications, exchanges, substitutions, or other events.
3.No Impairment. The Corporation will not, by amendment of its certificate of formation or through a 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 under this Warrant.
4.Certificate as to Adjustments. On each adjustment of the Warrant Exercise Price or the number of Warrant Shares, or both, the Corporation will promptly notify the holder of this Warrant in writing and, at the Corporation’s expense, promptly compute the adjustment and furnish the holder a certificate of its chief financial officer setting forth the adjustment, the facts on which the adjustment is based, the computation of the adjustment, the Warrant Exercise Price in effect, and the number of underlying Warrant Shares on the date thereof.
I.Lost, Stolen, Mutilated, or Destroyed Warrant
If this Warrant is lost, stolen, mutilated, or destroyed, the Corporation, on receipt of an indemnification undertaking from the registered holder, will issue a new Warrant of like denomination and having the same terms and conditions as the Warrant lost, stolen, mutilated, or destroyed.
J.Notice
Any notices, consents, waivers, or other communication required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered (1) on receipt, when delivered personally, (2) on receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party), or (3) one Business Day after deposit with a nationally recognized courier or delivery service for next-Business-Day (or sooner) delivery, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communication will be—
If to the Corporation:
[Name of corporation]
[Telephone no.]
[Fax no.]
Attention: [name]
Notice to the holder of this Warrant will be addressed as follows until the Corporation receives notice of a change in address:
[Name of registered holder]
[Telephone no.]
[Fax no.]
Attention: [name]
Each party will provide written notice to the other party of any change in address or facsimile number at least five days before the change. Written confirmation of receipt (1) given by the recipient of such notice, consent, waiver, or other communication; (2) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient’s facsimile number, and an image of the first page of the transmission; or (3) provided by a nationally recognized courier or delivery service will be rebuttable evidence of service or receipt in accord with this section J.
K.Binding Effect of This Warrant
Nothing in this Warrant, express or implied, is intended to confer on any party, other than the parties hereto and their respective permitted assigns, any rights, remedies, obligations, or liabilities under or by reason of this agreement, and no person who is not a party to this Warrant may rely on the terms except as otherwise set out. This Warrant (1) constitutes the entire agreement between the parties relating to the subject matter hereof and (2) supersedes all previous understandings and agreements between the parties relating to the subject matter hereof, both oral and written. The terms and conditions of this Warrant will be binding on and inure to the benefit of the respective successors and permitted assigns of the parties hereto.
L.Assignment
No party to this Warrant may assign its rights or delegate its obligations hereunder without the prior written consent of each party. Any such attempted assignment will be void ab initio. Subject to the preceding sentences, this Warrant will be binding on and inure to the benefit of the parties and their respective successors and assigns.
M.Amendment and Waiver
Except as otherwise provided herein, this Warrant may be amended only in writing, and either party may take an action herein prohibited, or omit to perform an act herein required, only if the Corporation and the holder of this Warrant agree in writing.
N.Counterparts
This Warrant may be executed in two or more counterparts, each of which will be deemed an original and all of which will constitute one instrument.
O.Severability
If any provision of this Warrant is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, the legality, validity, and enforceability of the remaining provisions of this Warrant will not be affected thereby, and in lieu of the illegal, invalid, or unenforceable provision, there will be added automatically as a part of this Warrant a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be legal, valid, and enforceable.
P.Further Assurances
The parties agree to take further actions and execute and deliver other documents, certificates, agreements, and other instruments as may be reasonably necessary or desirable to implement transactions contemplated by this Warrant.
Q.Gender and Number of Words
When the context requires, the gender of all words used in this Warrant includes the masculine, feminine, and neuter, and the number of all words includes the singular and the plural.
R.Descriptive Headings
The descriptive headings of the sections, subsections, or paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.
S.Governing Law
This Warrant will be governed by, construed under, and enforced in accordance with the laws of the state of Texas, without giving effect to any choice-of-law or conflict-of-laws provision or rule that would cause the application of the laws of any jurisdiction other than the state of Texas.
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This Warrant has been duly executed by the Corporation as of [date].
[Name of corporation]
By:
[Name of officer], [title]
Exhibit A
Subscription Form
To Be Executed by the Registered Holder to Exercise This Warrant
[Name of corporation]
I, [name of registered holder], hereby exercise the right to purchase from [name of corporation] [number] of the shares under the Warrant dated [date], issued to [name of registered holder] as registered holder (the “Warrant”). Capitalized terms used, and not otherwise defined herein, have the respective meanings set forth in the Warrant.
1.Payment of Warrant Exercise Price. To purchase those Warrant Shares, the amount of $[amount] is being paid to the Corporation in accordance with the terms of the Warrant.
2.Delivery of Warrant Shares. The Corporation will deliver to [the registered holder/[name of transferee], as transferee from the registered holder,] [include if applicable: , at the following address: [address, city, state]] certificates representing those Warrant Shares in accordance with the terms of the Warrant.
Date: [date]
[Name of registered holder]
Exhibit B
Form of Warrant Power
FOR VALUE RECEIVED, I, [name of transferor], hereby assign and transfer to [name of transferee] a Warrant to purchase [number] shares of the Common Stock of [name of corporation], a Texas corporation (the “Corporation”), dated [date], standing in the name of the undersigned on the books of the Corporation. I hereby irrevocably constitute and appoint [name of attorney], attorney, to transfer the Warrant, with full power of substitution in the premises.
Date: [date]
[Name of transferor]