EXHIBIT 99.4
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VOID AFTER 5:00 P.M.
EASTERN TIME ON DECEMBER 29, 2004
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase 1,400,000
Shares of Common Stock
Date: December , 2000
ON TECHNOLOGY CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, MARSHALL CAPITAL MANAGEMENT,
INC. or its registered assigns, is entitled to purchase from ON Technology
Corporation, a Delaware corporation (the "Company"), at any time or from time to
time during the period specified in Section 2 hereof, 1,400,000 fully paid and
nonassessable shares of the Company's common stock, $0.01 par value (the "Common
Stock"), at an initial exercise price of $0.01 per share (the "Exercise Price"),
subject to adjustment as contained in Section 4 hereof. This Warrant is being
issued in exchange for a warrant to purchase 257,419 shares of Common Stock
issued pursuant to that certain Securities Purchase Agreement dated December 29,
1999 between the Company and the signatories thereto (the "Securities Purchase
Agreement"). The number of shares of Common Stock purchasable hereunder (the
"Warrant Shares") and the Exercise Price are subject to adjustment as provided
in Section 4 hereof. The term "Warrants" means this Warrant and any other
warrants of the Company issued pursuant to the terms of the Securities Purchase
Agreement.
The term "Closing Bid Price" means, for any security as of any date,
the closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Company and reasonably acceptable to the holder hereof (the
"Holder") if Bloomberg Financial Markets is not then reporting closing bid
prices of such security (collectively, "Bloomberg"), or if the foregoing does
not apply, the last reported sale price of such security in the over-the-counter
market on the electronic bulletin board of such security as reported by
Bloomberg, or, if no sale price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau,
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Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as reasonably determined by an
investment banking firm selected by the Company and reasonably acceptable to the
Holder with the costs of such appraisal to be borne by the Company.
This Warrant is subject to the following terms, provisions, and
conditions:
1. Mechanics of Exercise. Subject to the provisions hereof, including,
without limitation, the limitations contained in Section 8(f) hereof, this
Warrant may be exercised as follows:
(a) Manner of Exercise. This Warrant may be exercised by the Holder, in
whole or in part, by the surrender of this Warrant (or evidence of loss, theft,
destruction or mutilation thereof in accordance with Section 8(c) hereof),
together with a completed exercise agreement in the Form of Exercise Agreement
attached hereto as Exhibit 1 (the "Exercise Agreement"), to the Company at the
Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the Holder), and upon (i) payment to
the Company in cash, by certified or official bank check or by wire transfer for
the account of the Company, of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the Holder elects to effect a
Cashless Exercise (as defined in Section 12(c) below), delivery to the Company
of a written Exercise Agreement for a Cashless Exercise hereunder for the
Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the Holder or Holder's designees, as
the record owner of such shares, as of the date on which this Warrant shall have
been surrendered, the completed Exercise Agreement shall have been delivered,
and payment (or notice of an election to effect a Cashless Exercise) shall have
been made for such shares as set forth above.
(b) Issuance of Certificates. Subject to Section 1(c), certificates for
the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the Holder within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have been so exercised (the "Delivery Period"). The certificates so delivered
shall be in such denominations as may be reasonably requested by the Holder and
shall be registered in the name of Holder or such other name as shall be
designated by such Holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the Holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
(c) Exercise Disputes. In the case of any dispute with respect to an
exercise, the Company shall promptly issue such number of shares of Common Stock
as are not disputed in accordance with this Section. If such dispute involves
the calculation of the Exercise Price, the Company shall submit the disputed
calculations to a nationally recognized independent accounting firm (selected by
the Company) via facsimile within three (3) business days of receipt of the
Exercise Agreement. The accounting firm shall audit the calculations and notify
the Company and the converting Holder of the results no later than two (2)
business days from the date it receives the disputed calculations. The
accounting firm's calculation shall be deemed conclusive, absent manifest
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error. The Company shall then issue the appropriate number of shares of Common
Stock in accordance with this Section.
(d) Fractional Shares. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Exercise Price of a share of
Common Stock (as determined for exercise of this Warrant into whole shares of
Common Stock); provided that in the event that sufficient funds are not legally
available for the payment of such cash adjustment any fractional shares of
Common Stock shall be rounded up to the next whole number.
(e) Buy-In. If (i) the Company fails for any reason (other than
Holder's failure to pay to the Company the Exercise Price or to deliver to the
Company a duly executed notice to exercise a Cashless Exercise) to deliver
during the Delivery Period shares of Common Stock to Holder upon an exercise of
this Warrant and (ii) after the applicable Delivery Period with respect to such
an exercise, Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to make delivery upon a sale by Holder of the shares of
Common Stock (the "Sold Shares") which Holder was entitled to receive upon such
exercise (a "Buy-in"), the Company shall pay Holder (in addition to any other
remedies available to Holder) the amount by which (x) Holder's total purchase
price (including brokerage commission, if any) for the shares of Common Stock so
purchased exceeds (y) the lesser of (A) the Exercise Price or (B) the net
proceeds received by Holder from the sale of the Sold Shares. Holder shall
provide the Company written notification indicating any amounts payable to
Holder pursuant to this subsection.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date hereof and before 5:00 P.M., Eastern Time on
the fourth (4th) anniversary of the date hereof (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and non-assessable and free from all liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) Listing. From and after the date of issuance of this
Warrant, the Company shall have secured and shall thereafter, for at least five
(5) years after the date of issuance of this Warrant, maintain the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon The
Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange
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or the American Stock Exchange, as required by Section 4.10 of the Securities
Purchase Agreement and upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed or
become listed and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of any other shares of capital stock of the
Company issuable upon the exercise of this Warrant so long as any shares of the
same class shall be listed on such national securities exchange or automated
quotation system; provided, however, that if the Company is a party to a
transaction following which the holder hereof no longer holds shares of capital
stock or securities convertible into shares of capital stock of the Company,
such obligation shall cease with respect to the Company; provided, further, that
if the shares of Common Stock, including the Warrant Shares, are converted in
such transaction into shares of capital stock or other equivalent equity
interest of another entity, such entity shall be bound by the provisions of this
Section 3(c) for the remainder of the five (5) year term.
(d) Certain Actions Prohibited. Subject to the provisions of
Section 4(f), the Company will not, by amendment of its charter or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such actions as may
reasonably be requested by the Holder of this Warrant in order to protect the
exercise privilege of the Holder of this Warrant, consistent with the tenor and
purpose of this Warrant (including, without limitation, Section 4(f) hereof).
Without limiting the generality of the foregoing, the Company will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant; provided, however, that if the Company is a party to a
transaction following which the stockholders of the Company no longer hold
shares of capital stock of the Company, such obligation shall cease with respect
to the Company; provided, further, that if the shares of Common Stock, including
the Warrant Shares, are converted in such transaction into shares of capital
stock or other equivalent equity interest of another entity, such entity shall
be bound by the provisions of this Section 3(d) for the remainder of the five
(5) year term.
4. Antidilution Provisions. During the Exercise Period or until fully
exercised, the Exercise Price and the number of Warrant Shares shall be subject
to adjustment from time to time as provided in this Section 4. In the event that
any adjustment of the Exercise Price as required herein results in a fraction of
a cent, such Exercise Price shall be rounded up or down to the nearest cent.
(a) Intentionally Deleted.
(b) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in Section 4(d) and 4(f)
hereof, if and whenever after
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the initial issuance of this Warrant, the Company issues or sells, or in
accordance with Section 4(c) hereof is deemed to have issued or sold, any shares
of Common Stock for no consideration or for a consideration per share less than
the Market Price on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
E' = (E) (O + P/M) / (CSDO)
where:
E' = the adjusted Exercise Price
E = the then current Exercise Price;
M = the then current Market Price;
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth
in Section 4(c) hereof, received by the Company upon
such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as herein defined) immediately after
the Dilutive Issuance.
(c) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Section 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities"), but not to include the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
or Director benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a
majority of the non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options"), and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("Below Market Options"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the price per share for which Common Stock
is issuable upon the exercise of such Below Market Options is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of such Below Market Options, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Below Market Options,
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plus, in the case of Convertible Securities issuable upon the exercise of such
Below Market Options, the minimum aggregate amount of additional consideration
payable upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Below Market Options or upon the exercise, conversion or
exchange of Convertible Securities issuable upon exercise of such Below Market
Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or
sells any Convertible Securities, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 4(c)(ii)(B) if applicable) is less
than the Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange is determined by dividing (i) the total amount,
if any, received or receivable by the Company as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuances of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or
sells any Convertible Securities with a fluctuating conversion or exercise price
or exchange ratio (a "Variable Rate Convertible Security"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 4(c)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
assuming that (1) all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied, and (2) the Market
Price on the date of issuance of such Convertible Security was 80% of the Market
Price on such date (the "Assumed Variable Market Price").
(iii) Change in Option Price or Conversion Rate.
Except for the grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee or Director benefit plan of the Company
now existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the non-employee members of the
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Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, if there is a change at any
time in (i) the amount of additional consideration payable to the Company upon
the exercise of any Options; (ii) the amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange or any
Convertible Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than under or by
reason of provisions designed to protect against dilution), the Exercise Price
in effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Options or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Options or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration except where such consideration consists of
freely-tradeable securities, in which case the amount of consideration received
by the Company will be the Market Price thereof as of the date of receipt. In
case any Common Stock, Options or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair market value of any
consideration other than cash or securities will be determined in the good faith
reasonable business judgment of the Board of Directors.
(vi) Exceptions to Adjustment of Exercise Price. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on the date
hereof in accordance with the terms of such securities as of such date; (ii)
upon the grant or exercise of any stock or options which may hereafter be
granted or exercised under any employee or Director benefit plan of the Company
now existing or to be
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implemented in the future, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon the issuance of the Common
Shares (as defined in the Securities Purchase Agreement) or Warrants in
accordance with terms of the Securities Purchase Agreement; or (iv) upon the
exercise of the Warrants.
(d) Subdivision or Combination of Common Stock. If the
Company, at any time after the initial issuance of this Warrant, subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a greater number
of shares, then, after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the initial issuance
of this Warrant, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.
(e) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(f) Major Transactions. If the Company shall consolidate or
merge with any other corporation or entity (other than a merger in which the
Company is the surviving or continuing entity and its capital stock is unchanged
and unissued in such transaction (except for Common Stock constituting less than
thirty percent (30%) of the Company's Common Stock then outstanding)) or any
subsidiary of the Company shall be a party to a merger or consolidation or other
extraordinary transaction and the Company issues thirty percent (30%) or more of
its Common Stock in any such merger, consolidation or other transaction or there
shall occur any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property or any
reclassification or change of the outstanding shares of Common Stock (each of
the foregoing being a "Major Transaction"), then each holder of a Warrant may
thereafter, at its option, be entitled, at its election, either to (a) in the
event the Common Stock remains outstanding or holders of Common Stock receive
any common stock or substantially similar equity interest, in each of the
foregoing cases which is publicly traded, retain its Warrant and such Warrant
shall continue to apply to such Common Stock or shall apply, as nearly as
practicable, to such other common stock or equity interest, as the case may be,
or (b) regardless of whether (a) applies, receive consideration, in exchange for
such Warrant, equal to the greater of, as determined in the sole discretion of
such holder, (i) the number of shares of stock or securities or property of the
Company, or of the entity resulting from such Major Transaction (the "Major
Transaction Consideration"), to which a holder of the number of shares of Common
Stock delivered upon the cashless exercise of such Warrant
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would have been entitled upon such Major Transaction had such holder so
exercised the Warrant (without regard to any limitations on conversion or
elsewhere contained) on the trading date immediately preceding, at the option of
Holder, either the public announcement of the transaction resulting in such
Major Transaction or the consummation of such Major Transaction and had such
Common Stock been issued and outstanding and had such Holder been the holder of
record of such Common Stock at the time of the consummation of such Major
Transaction, and (ii) cash paid by the Company in immediately available funds,
in an amount equal to one hundred percent (100%) of the Black-Scholes Amount (as
defined herein) times the number of shares of Common Stock for which this
Warrant was exercisable (without regard to any limitations on exercise herein
contained); and the Company shall make lawful provision for the foregoing as a
part of such Major Transaction and shall cause the issuer of any security in
such transaction which constitutes Registrable Securities under that certain
Registration Rights Agreement dated December 29, 1999 among the Company and the
signatories thereto (the "Registration Rights Agreement") to assume all of the
Company's obligations under the Registration Rights Agreement (provided any cash
election pursuant to clause (ii) above must be made in writing to the Company
within ten (10) business days following consummation of such applicable
transaction (or, in the event that a Company Transaction (as defined below)
occurs, within ten (10) business days following the Measurement Period (as
defined below)). If the application of clause (b) of the first sentence of this
Section 4(f) would result in the holder of a Warrant receiving consideration in
exchange for such Warrant which is greater than one hundred and fifty percent
(150%) of the Exercise Price thereof, then unless the Company determines
otherwise, such holder may not elect to retain such Warrant pursuant to clause
(a) of such sentence, but shall instead receive such consideration pursuant to
clause (b). In the event that the Company shall consolidate or merge with any
other corporation in a transaction in which common stock of the surviving
corporation or the parent thereof (the "Exchange Securities") is issued to the
holders of Common Stock in such transaction in exchange for all such Common
Stock, and (a) the Exchange Securities are publicly traded, (b) the average
daily trading volume of the Exchange Securities during the one hundred eighty
(180) day period ending on the date on which such transaction is publicly
disclosed is greater than two million dollars ($2,000,000) per day, (c) the
historical one hundred (100) day volatility of the Exchange Securities during
the period ending on the date on which such transaction is publicly disclosed is
greater than sixty percent (60%) and (d) the market capitalization of the issuer
of the Exchange Securities is not less than one hundred million dollars
($100,000,000) based on the last sale price of the Exchange Securities on the
date immediately before the date on which such transaction is publicly disclosed
(in each case, with respect to the foregoing clauses (a) through (d), as
reported by Bloomberg), or, in lieu of clauses (c) and (d) only, the market
capitalization of the issuer of the Exchange Securities is not less than one
billion dollars ($1,000,000,000) as reported by Bloomberg, then the provisions
of clause (b) of the first sentence of this Section 4(f) shall not apply. In the
event that the Company shall, in a Major Transaction, consolidate or merge with
any other corporation in a transaction in which the Company is the survivor (a
"Company Transaction"), the provisions of clause (ii) of the first sentence of
this Section 4(f) shall not apply to the extent that each of the following
conditions remain true for the thirty (30) business days commencing as of the
date of the consummation of such transaction (the "Measurement Period"): (a) the
Common Stock remains publicly traded during the period, (b) the average daily
trading volume of the Common Stock is greater than two million dollars
($2,000,000),
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(c) the historical thirty (30) day volatility of the Company's Common Stock is
greater than sixty percent (60%), and (d) the market capitalization of the
Company is not less than one hundred million dollars ($100,000,000) on the last
day of the period (in each case, with respect to the foregoing clauses (a)
through (d), as reported by Bloomberg), or in lieu of clauses (c) and (d) only,
the market capitalization of the Company is not less than one billion dollars
($1,000,000,000) as reported by Bloomberg. No sooner than ten (10) business days
nor later than five (5) business days prior to the consummation of the Major
Transaction, but not prior to the public announcement of such Major Transaction,
the Company shall deliver written notice ("Notice of Major Transaction") to each
holder of a Warrant, which Notice of Major Transaction shall be deemed to have
been delivered one (1) business day after the Company's sending such notice by
telecopy (provided such telecopy receipt has been confirmed and the Company
sends a confirming copy of such notice on the same day by overnight courier) of
such Notice of Major Transaction. Such Notice of Major Transaction shall
indicate the amount and type of the Major Transaction consideration which such
holder of a Warrant would receive under this Section. If the Major Transaction
Consideration does not consist entirely of United States currency, such holder
may elect to receive United States currency in an amount equal to the value of
the Major Transaction Consideration in lieu of the Major Transaction
Consideration by delivering notice of such election to the Company within five
(5) business days of such holder's receipt of the Notice of Major Transaction.
The "Black-Scholes Amount" shall be an amount determined by calculating
the "Black-Scholes" value of an option to purchase one share of Common Stock on
the applicable page on the Bloomberg online page, using the following variable
values: (i) the current market price of the Common Stock equal to the closing
trade price on the last trading day before the date of the Notice of the Major
Transaction; (ii) volatility of the Common Stock equal to the volatility of the
common Stock during the 100 trading day period preceding the date of the Notice
of the Major Transaction; (iii) a risk free rate equal to the interest rate on
the United States treasury bill or treasury note with a maturity corresponding
to the remaining term of this Warrant on the date of the Notice of the Major
Transaction; and (iv) an exercise price equal to the Exercise Price on the date
of the Notice of the Major Transaction. In the event such calculation function
is no longer available utilizing the Bloomberg online page, the Holder shall
calculate such amount in its sole discretion using the closest available
alternative mechanism and variable values to those available utilizing the
Bloomberg online page for such calculation function.
(g) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
stockholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "Distribution"), at any time after the initial issuance of this
Warrant, then the Holder shall be entitled upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, to receive
the amount of such assets (or rights) which would have been payable to the
Holder had such Holder been the holder of such shares of Common Stock on the
record date for the determination of stockholders entitled to such Distribution.
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(h) Notices of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the Holder, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(i) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(j) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock; provided that in the event that sufficient funds are not
legally available for the payment of such cash adjustment any fractional shares
of Common Stock shall be rounded up to the next whole number.
(k) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all of its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when
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the same shall take place. Such notice shall also specify the date on which the
holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto, but in no event earlier than public announcement of such
proposed transaction or event. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) in case of any
adjustment required by Section 4(b) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(b) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the
average of the Closing Bid Prices for the shares of Common Stock as reported to
The Nasdaq National Market for the fifteen (15) trading days immediately
preceding, but not including, the day prior to such date, or (ii) if The Nasdaq
National Market is not the principal trading market for the Common Stock, the
average of the last reported bid prices on the principal trading market for the
Common Stock during the same period, or, if there is no bid price for such
period, the last reported sales price for such period, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the average fair market value as reasonably determined by an
investment banking firm selected by the Company and reasonably acceptable to the
Holders of a majority in interest of the Warrants, with the costs of the
appraisal to be borne by the Company. The manner of determining the Market Price
of the Common Stock set forth in the foregoing definition shall apply with
respect to any other security in respect of which a determination as to market
value must be made hereunder.
(iii) "Common Stock," for purposes of this Section
4, includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(f) hereof, the stock or other securities or
property provided for in such Section.
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(m) Intentionally Deleted.
5. Intentionally Deleted.
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the Holder or such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the Holder.
7. No Rights or Liabilities as a Stockholder. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
8. Transfer, Exchange, Redemption and Replacement of Warrant.
a. Restriction on Transfer. This Warrant and the rights
granted to the Holder are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the Form of
Assignment attached hereto as Exhibit 2, at the office or agency of the Company
referred to in Section 8(e) below, provided, however, that any transfer or
assignment shall be subject to the provisions of Section 5.1 and 5.2 of the
Securities Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein, the registration rights described in Section 9
hereof are assignable only in accordance with the provisions of the Registration
Rights Agreement.
b. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company referred to in Section 8(e) below, for new Warrants, in
the form hereof, of different denominations representing in the aggregate the
right to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the Holder of at the time of such
surrender.
c. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant or, in the case of any such loss, theft, or destruction, upon
delivery, of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
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cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant, in the form hereof, in such
denominations as Holder may request.
d. Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all issuance taxes (other than securities
transfer taxes) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 8.
e. Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
f. Additional Restriction on Exercise or Transfer.
Notwithstanding anything to the contrary contained herein, the Warrants shall
not be exercisable by the Holder to the extent (but only to the extent) that, if
exercisable by Holder, Holder would beneficially own in excess of 4.9% (the
"Applicable Percentage") of the shares of Common Stock. To the extent the above
limitation applies, the determination of whether the Warrants shall be
exercisable (vis-a-vis other securities owned by Holder which contain similar
limitations on conversion) and of which Warrants shall be exercisable (as among
Warrants) shall be made on the basis of the earliest submission of the Warrants
(vis-a-vis other securities owned by the Holder which contain similar
limitations on conversion and vis a vis other Warrants), in each case subject to
such aggregate percentage limitation. No prior inability to exercise Warrants
pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination of
exercisability. For the purposes of this paragraph, beneficial ownership and all
determinations and calculations, including without limitation, with respect to
calculations of percentage ownership, shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D and G thereunder. The provisions of this paragraph may be implemented in a
manner otherwise than in strict conformity with the terms of this Section 8(f)
with the approval of the board of directors of the Company and the Holder: (i)
with respect to any matter to cure any ambiguity herein, to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Applicable Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such Applicable Percentage limitation; and (ii) with respect to
any other matter (including through any amendment of this Warrant), with the
further consent of the holders of a majority of the then outstanding shares of
Common Stock. For clarification, it is expressly a term of this security that
the limitations contained in this Section shall apply to each successor Holder.
9 Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
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10 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
confirmed telecopy, and shall be deemed delivered at the time and date of
receipt (which shall include telephone line facsimile transmission). The
addresses for such communications shall be:
If to the Company:
ON Technology Corporation
Waltham Woods
880 Winter Street, Building 4
Waltham, MA 02451-1449
Telecopy: (781)487-3300
Attention: President
with a copy to:
Epstein Becker & Green, P.C.
75 State Street
Boston, Massachusetts 02109-1807
Telecopy: (617)342-4001
Attention: Gabor Garai, Esq.
and if to the Holder, at such address as Holder shall have provided in writing
to the Company, or at such other address as each such party furnishes by notice
given in accordance with this Section 10.
11 Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts
located in the State of New York and the state courts located in the County of
New York in the State of New York in any suit or proceeding based on or arising
under this Warrant and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company agrees that a final nonappealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
12 Miscellaneous.
a Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the Holder,
subject to the limitation contained in Section 8(f).
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b Descriptive Headings. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
c Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the Holder's intention to effect a Cashless Exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the Holder shall surrender this Warrant for the number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be such then current
Market Price per share of Common Stock.
d Assignability. This Warrant shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of Holder
and its successors and assigns. The Holder shall notify the Company upon the
assignment of this Warrant.
* * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
ON Technology Corporation
By: __________________________
Name: __________________________
Title: __________________________
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FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of common stock of ON Technology Corporation, a
Delaware corporation (the "Company"), evidenced by the attached Warrant, and
[herewith makes payment of the Exercise Price with respect to such shares in
full/ elects to effect a Cashless Exercise pursuant to the terms of the
Warrant], all in accordance with the conditions and provisions of said Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(ii) The undersigned requests that stock certificates for such shares
be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder (or such other person or
persons indicated below) and delivered to the undersigned (or designee(s) at the
address (or addresses) set forth below:
Date:
----------------------- -------------------------------------------
Signature of Holder
-------------------------------------------
Name of Holder (Print)
Address:
-------------------------------------------
-------------------------------------------
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all rights of the undersigned under the within Warrant, with respect
to the number of shares of Common Stock covered thereby set forth hereinbelow,
to:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Date:____________, _____,
In the presence of
Name:
------------------------------------------------
Signature:
------------------------------------------------
Title of Signing Officer or Agent (if any):
Address:
----------------------------------------
----------------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
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