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EXHIBIT 3
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE WASHINGTON STATE
SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE "ACTS"), AND NEITHER
THE OFFERING OF THIS WARRANT, THE SECURITIES ISSUABLE UPON ITS EXERCISE NOR ANY
OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY ADMINISTRATOR UNDER THE ACTS. THIS
WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF ANY
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACTS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE COBALT GROUP, INC.
Common Stock Purchase Warrant
The Cobalt Group, Inc., a Washington corporation (the "Company"), hereby
certifies that, for value received, Warburg, Pincus Equity Partners, L.P. or
registered assigns (the "Holder") is entitled, subject to the terms set forth
below, to purchase from the Company, at any time and from time to time during
the period beginning on June 26, 2000 and ending on June 26, 2005 (the
"Expiration Date"), in whole or in part, an aggregate of 416,390 (four hundred
sixteen thousand three hundred ninety) fully paid and non-assessable shares of
the Common Stock of the Company at a purchase price, subject to the provisions
of Paragraph 3 hereof, of $6.8578 per share (the "Purchase Price"). The Purchase
Price and the number and character of such shares are subject to adjustment as
provided below, and the term "Common Stock" shall mean, unless the context
otherwise requires, the stock or other securities or property at the time
deliverable upon the exercise of this Warrant. This Warrant is herein called the
"Warrant."
1. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall
be exercised by the Holder surrendering this Warrant, with the form of
subscription at the end hereof duly executed by the Holder, to the Company at
its office in Seattle, Washington, accompanied by payment, of an amount (the
"Exercise Payment") equal to the Purchase Price multiplied by the number of
shares being purchased pursuant to such exercise, payable as follows: (i) by
payment to the Company in cash, by certified or official bank check, or by wire
transfer of the Exercise Payment, (ii) by surrender to the Company for
cancellation of securities of the Company having a Market Price (as hereinafter
defined) on the date of exercise equal to the Exercise Payment; or (iii) by a
combination of the methods described in clauses (i) and (ii) above. In lieu of
payment of the Exercise Payment as described above, the Holder may elect to
receive a number of shares of Common Stock with an aggregate value (valued at
the Market Price on the date of exercise) equal to the difference between (i)
the Market Price on the date of exercise multiplied by the number of shares as
to which the Warrant is then being exercised and (ii) the Exercise Payment with
respect to such shares. For purposes hereof, the term "Market Price" shall mean,
with respect to any particular date, the average closing price of a
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share of Common Stock for the 20 consecutive trading days preceding such date on
the principal national securities exchange on which the shares of Common Stock
or securities are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, the average of the reported bid and
asked prices during such 20 trading day period in the over-the-counter market as
furnished by the National Quotation Bureau, Inc., or, if such firm is not then
engaged in the business of reporting such prices, as furnished by any member of
the National Association of Securities Dealers, Inc. selected by the Company or,
if the shares of Common Stock or securities are not publicly traded, the Market
Price on such date shall be the fair market value of a share of Common Stock or
the security on such date determined jointly by the Company and the holder of
this Warrant; provided, however, that if such parties are unable to reach
agreement within a reasonable period of time, the Market Price shall be
determined in good faith by an independent investment banking firm selected
jointly by the Company and the holder of this Warrant or, if that selection
cannot be made within 15 days, by an independent investment banking firm
selected by the American Arbitration Association in accordance with its rules.
In no event may this Warrant be exercised at any time after the Expiration Date.
Partial Exercise. This Warrant may be exercised for less than the full
number of shares of Common Stock, in which case the number of shares receivable
upon the exercise of this Warrant as a whole, and the sum payable upon the
exercise of this Warrant as a whole, shall be proportionately reduced. Upon any
such partial exercise, the Company at its expense will forthwith issue to the
Holder a new Warrant or Warrants of like tenor calling for the number of shares
of Common Stock as to which this Warrant has not been exercised, such Warrant or
Warrants to be issued in the name of the Holder hereof or his or its nominee
(upon payment by the Holder of any applicable transfer taxes).
DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable after the
exercise of this Warrant and payment of the Exercise Payment, and in any event
within ten (10) days thereafter, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder a certificate or certificates
for the number of fully paid and non-assessable shares of Common Stock or other
securities or property to which the Holder shall be entitled upon such exercise,
plus, in lieu of any fractional share to which the Holder would otherwise be
entitled, cash in an amount determined in accordance with Paragraph 3.7 hereof.
The Company agrees that the shares of Common Stock so purchased shall be deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid.
ADJUSTMENTS. In order to prevent dilution of the right granted hereunder, the
Purchase Price shall be subject to adjustment from time to time in accordance
with this Paragraph 3. Upon each adjustment of the Purchase Price pursuant to
this Paragraph 3, the registered Holder of this Warrant shall thereafter be
entitled to acquire upon exercise, at the Purchase Price resulting from such
adjustment, the number of shares of the Company's Common Stock obtainable by
multiplying the Purchase Price in effect immediately prior to such adjustment by
the number of shares of the Company's Common Stock acquirable immediately prior
to such adjustment and dividing the product thereof by the Purchase Price
resulting from such adjustment.
Dividends Not Paid Out of Earnings or Earned Surplus. In the event the
Company shall declare a dividend upon the Common Stock (other than a dividend
payable in
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Common Stock) payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries (herein referred to as "Liquidating Dividends"), then, as soon
as possible after the exercise of this Warrant, the Company shall pay to the
person exercising this Warrant an amount equal to the aggregate value of all
Liquidating Dividends that would have been payable in respect of the Common
Stock issuable upon exercise of this Warrant immediately prior to such
Liquidating Dividend at the Purchase Price then in effect (including but not
limited to all securities which would have been issued with respect to such
Common Stock by reason of stock splits, stock dividends, mergers or
reorganizations, or for any other reason). For the purposes of this Paragraph
3.1, a dividend other than in cash shall be considered payable out of earnings
or earned surplus only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as determined in good
faith by the Board of Directors of the Company.
Subdivisions and Combinations. In case the Company shall at any time (i)
subdivide the outstanding Common Stock or (ii) issue a stock dividend on its
outstanding Common Stock, the Purchase Price in effect immediately prior to such
subdivision or dividend shall be proportionately reduced by the same ratio as
the subdivision or dividend. In case the Company shall at any time combine its
outstanding Common Stock, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased by the same ratio as the
combination.
Reorganization, Reclassification, Consolidation, Merger or Sale of Assets.
If any capital reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with or into another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Holder shall have the right to acquire and receive,
upon exercise of this Warrant, such shares of stock, securities, cash or other
property issuable or payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such number of
outstanding shares of the Common Stock as would have been received upon exercise
of this Warrant in full at the Purchase Price then in effect. The Company will
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor entity (if other than the Company) resulting
from such consolidation or merger or the entity purchasing such assets shall
assume by written instrument mailed or delivered to the Holder at the last
address of the Holder appearing on the books of the Company, the obligation to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
purchase. If a purchase, tender or exchange offer is made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock and at that
time Warburg, Pincus Equity Partners, L.P. is the Holder, the Company shall not
effect any consolidation, merger or sale with the person having made such offer
or with any Affiliate of such person, unless prior to the consummation of such
consolidation, merger or sale such Holder shall have been given a reasonable
opportunity to then elect to receive upon the exercise of this Warrant either
the stock, securities or assets then issuable with respect to the Common Stock
or the stock, securities or assets, or the equivalent, issued to previous
holders of the Common Stock in
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accordance with such offer. For purposes hereof the term "Affiliate" with
respect to any given person shall mean any person controlling, controlled by or
under common control with the given person.
Notices of Record Date, Etc. In the event that:
the Company shall declare any dividend upon its Common Stock that is
not a Liquidating Dividend, or
the Company shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or other
rights,
then the Company shall give to the Holder at least twenty (20) days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend or subscription rights. Such notice
shall also specify the date on which the holder of the Common Stock shall be
entitled to such dividend or subscription rights.
In the event that:
(1) there shall be any capital reorganization or reclassification of
the capital stock of the Company, including any subdivision or combination
of its outstanding shares of Common Stock, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to,
another corporation, or
(2) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
the Company shall give to the Holder, at least twenty (20) days' prior written
notice of the date when the same shall take place. Such notice shall specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Each such written notice shall be
given by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company.
Grant, Issue or Sale of Options, Convertible Securities, or Rights. If at
any time or from time to time on or after the date of issuance hereof, the
Company shall grant, issue or sell any rights to subscribe for or to purchase,
or any options for the purchase of, Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock, or rights to
purchase property (the "Purchase Rights") pro rata to the record holders of any
class of Common Stock, then the Holder shall be entitled to acquire (within
thirty (30) days after the later to occur of the initial exercise date of such
Purchase Rights or receipt by such holder of the notice concerning Purchase
Rights to which such holder shall be entitled under Paragraph 3.4) and upon the
terms applicable to such Purchase Rights either:
the aggregate Purchase Rights which the Holder could have acquired if
it had held the number of shares of Common Stock acquirable upon exercise
of this Warrant immediately before the grant, issuance or sale of such
Purchase Rights; provided
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that if any Purchase Rights were distributed to holders of Common Stock
without the payment of additional consideration by such holders,
corresponding Purchase Rights shall be distributed to the exercising Holder
as soon as possible after such exercise and it shall not be necessary for
the Holder specifically to request delivery of such rights; or
in the event that any such Purchase Rights shall have expired or shall
expire prior to the end of said thirty (30) day period, the number of
shares of Common Stock or the amount of property which the Holder could
have acquired upon such exercise at the time or times at which the Company
granted, issued or sold such expired Purchase Rights.
Adjustment by Board of Directors. If any event occurs as to which, in the
opinion of the Board of Directors of the Company, the provisions of this Section
3 are not strictly applicable or if strictly applicable would not fairly protect
the rights of the Holder in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Purchase Price as otherwise
determined pursuant to any of the provisions of this Section 3 except in the
case of a combination of shares of a type contemplated in Paragraph 3.2 and then
in no event to an amount larger than the Purchase Price as adjusted pursuant to
Paragraph 3.2.
Fractional Shares. The Company shall not issue fractions of shares of
Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any
fraction of a share of Common Stock would, except for the provisions of this
Paragraph 3.7, be issuable upon exercise of this Warrant, the Company shall in
lieu thereof pay to the person entitled thereto an amount in cash equal to the
current value of such fraction, calculated to the nearest one-hundredth (1/100)
of a share, to be computed on the basis of the Market Price as of the date of
exercise.
Officers' Statement as to Adjustments. Whenever the Purchase Price shall be
adjusted as provided in Section 3 hereof, the Company shall forthwith file at
the Company's office in Seattle, Washington, a statement, signed by the Chairman
of the Board, the President, any Vice President or Treasurer of the Company,
showing in reasonable detail the facts requiring such adjustment and the
Purchase Price that will be effective after such adjustment. The Company shall
also cause a notice setting forth any such adjustments to be sent by mail, first
class, postage prepaid, to the record Holder at his or its address appearing on
the stock register. If such notice relates to an adjustment resulting from an
event referred to in Paragraph 3.4, such notice shall be included as part of the
notice required to be mailed and published under the provisions of Paragraph 3.4
hereof.
NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its certificate
of incorporation or through reorganization, consolidation, merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against dilution or other impairment. Without limiting
the generality of the foregoing, the Company will not increase the par value of
any shares of stock receivable
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upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and at all times will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable stock upon the exercise of this Warrant.
RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The Company shall
at all times reserve and keep available out of its authorized but unissued
stock, solely for the issuance and delivery upon the exercise of this Warrant
and other similar Warrants, such number of its duly authorized shares of Common
Stock as from time to time shall be issuable upon the exercise of this Warrant
and all other similar Warrants at the time outstanding.
REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and (in
the case of loss, theft or destruction) upon delivery of an indemnity agreement
(with surety if reasonably required) in an amount reasonably satisfactory to it,
or (in the case of mutilation) upon surrender and cancellation thereof, the
Company will issue, in lieu thereof, a new Warrant of like tenor.
REMEDIES. The Company stipulates that the remedies at law of the Holder in the
event of any default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate, and that the same
may be specifically enforced.
NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to all of
which each taker or owner hereof consents and agrees:
Subject to the legend appearing on the first page hereof, title to this
Warrant may be transferred by endorsement (by the Holder executing the
form of assignment at the end hereof including guaranty of signature)
and delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery.
Until this Warrant is transferred on the books of the Company, the Company
may treat the registered Holder as the absolute owner hereof for all
purposes without being affected by any notice to the contrary.
Prior to the exercise of this Warrant, the Holder shall not be entitled to
any rights of a shareholder of the Company with respect to shares for
which this Warrant shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company,
except as provided herein.
The Company shall not be required to pay any Federal or state transfer tax
or charge that may be payable in respect of any transfer involved in
the transfer or delivery of this Warrant or the issuance or conversion
or delivery of certificates for Common Stock in a name other than that
of the registered Holder or to issue or deliver any certificates for
Common Stock upon the exercise of this Warrant until any and all such
taxes and charges
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shall have been paid by the Holder or until it has been established to
the Company's satisfaction that no such tax or charge is due.
SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants issued pursuant
to the provisions of this paragraph) is exchangeable, upon the surrender hereof
by the Holder, at the principal office of the Company for any number of new
warrants of like tenor and date representing in the aggregate the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
MAILING OF NOTICES, ETC. All notices and other communications from the Company
to the Holder shall be mailed by first-class certified mail, postage prepaid, to
the address furnished to the Company in writing by the last holder of this
Warrant who shall have furnished an address to the Company in writing.
HEADINGS, ETC. The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect the meaning hereof.
CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
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GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAW OF THE STATE OF WASHINGTON.
THE COBALT GROUP, INC.
By /s/ Jackie Davidson
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Dated: June 26, 2000
Attest:
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[To be signed only upon exercise of Warrant]
To The Cobalt Group, Inc.
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______________ shares of Common Stock, par value $0.01 per
share, of The Cobalt Group, Inc., and herewith makes payment of $_______
therefor, and requests that the certificates for such shares be issued in the
name of, and be delivered to ____________________ whose address is
________________________.
Dated:
________________________
____________________________
(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)
____________________________
Address
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[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the right represented by the within Warrant to
purchase __________________ shares of Common Stock of The Cobalt Group, Inc. to
which the within Warrant relates, and appoints ____________________ attorney to
transfer said right on the books of The Cobalt Group, Inc., with full power of
substitution in the premises.
Dated:
________________________
____________________________
(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)
____________________________
Address
In the presence of:
________________________
