Exhibit 10.4
VOID AFTER 5:00 P.M., CENTRAL TIME ON AUGUST 2, 2004 NO. ________
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 396,899 Shares of
Common Stock, $.01 par value
Date: August 2, 2000
THCG, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CASTLE CREEK TECHNOLOGY
PARTNERS LLC, an Illinois limited liability company (the "Initial Holder," and
together with any transferees as permitted under this Warrant, the "Holder"), or
its registered assigns, is entitled to purchase from THCG, Inc., a Delaware
corporation (the "Company"), at any time or from time to time during the period
specified in Section 2 hereof, 396,899 fully paid and non-assessable shares of
the Company's Common Stock, $.01 par value (the "Common Stock"), at an exercise
price of $5.039 per share (the "Exercise Price"). This Warrant is being issued
pursuant to that certain Securities Purchase Agreement dated August 1, 2000 by
and among the Company and the Holder (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 "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
("Bloomberg") or if Bloomberg is not then reporting closing bid prices of such
security, 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 all market makers
for such security as reported in the "pink sheets" by the National Quotation
Bureau, Inc.
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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 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 to 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 notice of an election to effect a Cashless Exercise 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.
Notwithstanding anything in the foregoing which may be to the contrary, the
effective date of any exercise shall be the date on which the Exercise Agreement
is delivered to the Company, so long as this Warrant is delivered to the Company
within three (3) business days after such date.
(b) Issuance of Certificates. Subject to Section 1(c) hereof,
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 Section (b) hereof. If such dispute
involves the calculation of the Exercise
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Price, the Company shall submit the disputed calculations to a nationally
recognized independent accounting firm (selected by the Company and reasonably
acceptable to Holder) 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 exercising Holder of the results no later than five
(5) business days from the date it receives the disputed calculations. The
accounting firm's calculation shall be deemed conclusive, absent manifest error.
The Company shall then issue the appropriate number of shares of Common Stock in
accordance with Section 1(b) hereof.
(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.
2. Period of Exercise. This Warrant is exercisable at any time and from
time to time on or after the date hereof and before 5:00 P.M., Central Standard
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 taxes, liens, claims and encumbrances,
except those placed thereon by the Holder or any person claiming rights by,
through or under the Holder.
(b) Reservation of Shares. On the Closing Date (as defined in the
Securities Purchase Agreement) and thereafter, 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. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon the Nasdaq
National Market ("Nasdaq") and use its best efforts to secure the listing of its
securities on the Nasdaq National Market or the New York Stock Exchange and upon
each such 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
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system.
(d) Certain Actions Prohibited. 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. Without limiting
the generality of the foregoing, the Company (i) will not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such actions as may be
reasonably necessary or appropriate in order that the Company may at all times
validly and legally issue fully paid and non- assessable shares of Common Stock
upon the exercise of this Warrant.
4. Antidilution Provisions. Subject to Section 8(f), during the Exercise
Period, the Exercise Price and the number of Warrant Shares issuable 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) Adjustments of Exercise Price.
(i) Except as otherwise provided in Section 4(a),
4(c) or 4(e) hereof, if and whenever after the initial issuance of this Warrant,
the Company issues or sells, or in accordance with Section 4(b) 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 then current Exercise Price on the date of
issuance, then effective immediately upon such issuance, the Exercise Price will
be adjusted to be equal to the consideration per share received, or deemed to be
received pursuant to this Section 4, in such issuance.
(ii) Except as otherwise provided in Section
4(a)(i), 4(c) or 4(e) hereof, if and whenever after the initial issuance of this
Warrant, the Company issues or sells, or in accordance with Section 4(b) 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 then current Market
Price (as defined in Section 4(k)(ii)) (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;
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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(b) 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.
Notwithstanding anything to the contrary in this Section 4(a)(ii), no adjustment
shall be made under this Section 4(a)(ii) to the Exercise Price if shares of
Common Stock are issued or sold or, in accordance with Section 4(b) hereof, are
deemed to be issued or sold by the Company, for a consideration per share in
excess of 125% of the then effective Exercise Price.
(b) 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
committee of independent directors of the Company) (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 greater of the
Exercise Price or 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, 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.
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(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(b)(ii)(B) if applicable) is less
than the greater of the Market Price or the Exercise Price then in effect 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(b)(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 discount or
adjustment to the price of exercise, conversion or exchange (including, without
limitation, resets) contained in such Convertible Security have been satisfied,
and (2) the Market Price on the date of issuance of such Convertible Security
was eighty five percent (85%) 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 committee of independent directors of the
Company, 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
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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 (a) upon the issuance of shares as
consideration in connection with an acquisition by the Company of any business
or assets, regarding which the Company has obtained a fairness opinion from a
nationally recognized investment banking firm or regarding which an appropriate
officer of the Company has certified to the Purchaser that the board of
directors of the Company has determined in its reasonable business judgment that
the Company has received in such transaction the fair value for the shares
issued therefor; (b)
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upon the issuance of shares as consideration for services provided to the
Company, (I) the issuances of which have been committed by the Company prior to
the Closing Date and have been disclosed to the Purchaser in the schedules
delivered pursuant to the Securities Purchase Agreement, or (II) the issuances
of which are committed by the Company after the Closing Date, provided, however,
that services provided pursuant to this clause (II) shall not exceed $200,000 in
value so long as any shares of Preferred Stock are outstanding and services
provided under this clause (b) in the aggregate shall not exceed $500,000 in
value so long as any shares of Preferred Stock are outstanding; (c) upon the
exercise, conversion or exchange of Convertible Securities issued and
outstanding on the date hereof in accordance with the terms of such securities;
(d) upon issuances of Common Stock or option pursuant to any stock option, stock
purchase or restricted stock plan of the Company covering employees, consultants
and/or non-employee directors (and any amendment thereof or any award
thereunder, provided any such amendment does not reduce any exercise price to an
amount below $5.00 per share), so long as the issuance of such stock or option
(other than to non-employee directors) is approved by a committee of independent
directors of the Company, (e) upon the issuance of the Warrant Shares or the
issuance of Conversion Shares (as defined in the Securities Purchase Agreement)
in accordance with the Certificate of Designation (as defined in the Securities
Purchase Agreement); (f) upon the exercise of this Warrant and Conversion of the
Preferred Stock; (g) upon issuance of Common Stock pursuant to strategic
investments from industry participants, the primary purpose of each of which is
not to raise equity capital; (h) upon issuance of Common Stock to Ladenburg
Thalmann pursuant to a warrant to be issued in connection with the closing of
the transaction contemplated by the Securities Purchase Agreement or upon the
issuance of such warrant; (i) in a fully distributed underwritten public
offering or (j) upon issuance of Common Stock under the terms of the April 11,
2000 acquisition by the Company of Giza Group.
(c) 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.
(d) 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.
(e) Major Transactions. (i) If the Company shall with the
approval of its Board of Directors consolidate or merge with any other
corporation or entity (other than a consolidation or merger in which the Company
is the surviving or continuing entity and either its capital stock is unchanged
and unissued in such transaction or such capital stock is issued, which
issuance, in the aggregate with all other such issuances during the 180-day
period ending on the date on which such transaction is publicly disclosed, does
not exceed twenty percent (20%) of the Common Stock), 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 there shall occur any
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other such reclassification or change of the outstanding shares of Common Stock,
or the Company shall sell all or substantially all of its assets (each of the
foregoing being a "Major Transaction"), then the holder of this Warrant may, at
its option exercised by written notice to the Company given not more than five
(5) days prior to the consummation of such transaction, either (a) in the event
that 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 this Warrant and this 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, in exchange for this Warrant
(without payment of any exercise price hereunder), a number of shares of stock
or securities or property (including cash) of the Company, or of the entity
resulting from such Major Transaction, to which a holder of the number of shares
of Common Stock delivered upon the exercise of this Warrant (pursuant to the
cashless exercise feature hereof) would have been entitled upon such Major
Transaction had such holder so exercised this Warrant (without regard to any
limitations on exercise herein or elsewhere contained, other than the Cap
Amount) on the trading date immediately preceding the effective date 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 (the "Major Transaction Consideration"),
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 August 2, 2000 by and among the Company and the signatories
thereto (the "Registration Rights Agreement") to assume all of the Company's
obligations under the Registration Rights Agreement.
(ii) In the event that the Company shall publicly propose to 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 on the
NASDAQ National Market or the New York Stock Exchange on the date such proposed
transaction is publicly disclosed and remain so traded following consummation of
such transaction, (b) the average daily trading volume of the Exchange
Securities during the 45 trading day period beginning on the date on which such
transaction is publicly disclosed is equal to or greater than the average daily
trading volume of the Common Stock during the 45 trading day period ending on
the date on which such transaction is publicly disclosed, (c) the historical 45
trading day volatility of the Exchange Securities during the period beginning on
the date on which such transaction is publicly disclosed is equal to or greater
than the 45 trading day volatility of the Common Stock during the 45 trading day
period ending on the date on which such transaction is publicly disclosed and
(d) the market capitalization of the issuer of the Exchange Securities, based on
the last sale price of the Exchange Securities on the date which is 45 trading
days after the date on which such transaction is publicly disclosed, is equal to
or greater than the market capitalization of the Company 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 a comparable reporting service of national
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reputation selected by the Company and reasonably acceptable to Majority Holders
(as defined in the Certificate of Designation) if Bloomberg is not then
reporting closing sale prices of such security), then the provisions of clause
(b) of paragraph (i) above shall not apply.
(iii) 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 and less than 40% of the Common Stock of the Company
will have been issued, in the aggregate, in all the transactions described in
paragraph (i) above during the 180-day period ending on the date on which such
transaction is publicly disclosed, the provisions of clause (b) of paragraph (i)
above shall not apply to the extent that each of the following conditions is
satisfied: (a) the Common Stock remains publicly traded on the NASDAQ National
Market, (b) the average daily trading volume of the Common Stock during the 45
trading day period beginning on the date on which such transaction is publicly
disclosed is equal to or greater than the average daily trading volume of the
Common Stock during the 45 trading day period ending on the date on which such
transaction is publicly disclosed, (c) the historical 45 trading day volatility
of the Company's Common Stock during the period beginning on the date on which
such transaction is publicly disclosed is equal to or greater than the 45
trading day volatility of the Common Stock during the 45 trading day period
ending on the date on which such transaction is publicly disclosed, and (d) the
market capitalization of the Company, based on the last sale price of the Common
Stock on the date which is 45 trading days after the date on which such
transaction is publicly disclosed is equal to or greater than the market
capitalization of the Company 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).
(iv) No sooner than ten (10) business days nor later than five (5)
business days prior to the consummation of a 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 that
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 is cash and 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) days of such holder's receipt of the Notice of Major
Transaction.
(f) 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
shareholders 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
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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 shareholders entitled to such Distribution, provided that such
exercise shall have occurred on or before the payment date for such
Distribution.
(g) Intentionally omitted.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than one percent (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 one
percent (1%) of such Exercise Price.
(i) [Intentionally Omitted]
(j) 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 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,
<PAGE>
liquidation or winding-up, as the case may be. Such notice shall be given at
least thirty (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.
(k) 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(a) 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(a) 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 Nasdaq
for the ten (10) trading days immediately preceding, but not including, such
date; provided, however, that in no event, shall the Market Price be greater
than the Closing Bid Price on the day immediately preceding the determination
date, or (ii) if Nasdaq 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 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 Warrant, 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(e) hereof, the stock or other securities or
property provided for in such Section.
(l) Key Officer or Director Transfers. If any Key Officer (as
defined below)
<PAGE>
or Insider Directors (as defined below) (or, in each case, any member of his/her
family or any trust or other entity for the benefit of him/her or of any member
of his/her family, or any of his affiliates under federal securities law),
during the period beginning on the date of the Closing and ending on the date
that is six (6) months after the Registration Statement (as defined in the
Registration Rights Agreement) required pursuant to Section 2.1 of the
Registration Rights Agreement is declared effective (provided that such period
shall be extended to the extent of any Registration Suspension (as defined in
the Registration Rights Agreement)) (the "Transfer Period"), and while a Key
Officer or Insider Director, directly or indirectly, offers, sells, transfers,
assigns, pledges or otherwise disposes of any shares of Common Stock, or any
securities directly or indirectly convertible into or exercisable or
exchangeable for, or warrants, options or rights to purchase or acquire shares
of Common Stock (all such securities, "Options") or enters into any agreement,
contract, arrangement or understanding with respect to any such offer, sale,
transfer, assignment or other disposition of any Common Stock or Options or
provides or files any public notice, including pursuant to Rule 144 of the
Securities Act, of a bona fide intent to dispose of a specified amount of Common
Stock or Options (an "Executive Transfer"), then the Exercise Price for each
such Executive Transfer shall be adjusted to be reduced by twenty (20%) percent
of that Exercise Price calculated pursuant to this Warrant; provided, however
that a Key Officer or Insider Director (and all such entities for the benefit of
any member of his/her family, and all such affiliates, collectively) may in the
aggregate sell during the portion of the Transfer Period which is following
effectiveness of such Registration Statement up to ten percent (10%) of his/her
total holdings of Common Stock on a fully diluted basis as of July 31, 2000
without triggering any adjustments pursuant to this section 4(l). Any
inadvertent Executive Transfer in excess of such 10% limit shall not trigger the
adjustments described in this Section 4(l) if such Transfer is reversed or
offset by a purchase promptly after the discovery thereof. For purposes of this
Section, a Key Officer shall mean individuals listed on Schedule 8.2(a) of the
Securities Purchase Agreement and any individual who assumes or performs any of
the duties of any Key Officer and the Insider Directors shall mean individuals
listed in Schedule 8.2(b) of the Securities Purchase Agreement. For purposes of
clarification, and without implication that the contrary would otherwise be
true, each such Executive Transfer during the Transfer Period shall result in a
reduction of the Exercise Price by twenty percent (20%) and such reductions, in
addition to any other adjustments to the Exercise Price pursuant to this
Warrant, shall be cumulative. For example, if a Key Officer makes an Executive
Transfer when the Exercise Price is $10.00, the Exercise Price would be reduced
to $8.00. If the Common Stock subsequently undergoes a two-for- one split, the
Exercise Price would be reduced to $4.00. If, subsequent to the split, the same
or another Key Officer makes an Executive Transfer, the Exercise Price would be
further reduced to $3.20. Notwithstanding the foregoing, any Key Officer or
Insider Director shall be entitled to make Permitted Transfers (as defined
below) without limitation and any Permitted Transfer shall not be included in
any computation of the 10% limitation set forth in the preceding paragraph. The
term "Permitted Transfer" shall mean (i) any assignment, gift or other transfer
to any child, spouse, or other family member or trust for the benefit of any
family member, provided that further transfers by any such transferees shall
continue to be subject to this Section 4 or (ii) any bona fide gift to any
charitable organization.
5. Intentionally omitted.
<PAGE>
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the Holder of 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 Shareholder. This Warrant shall not
entitle the Holder to any voting rights or other rights as a shareholder 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 shareholder 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. No Holder may assign this Warrant or
any portion thereof without the prior written consent of the Company.
Notwithstanding the foregoing, a Holder may transfer a proportionate amount of
this Warrant without the consent of the Company to any person to whom Preferred
Stock is assigned in accordance with the terms of the Certificate of Designation
so long as such transferee is an accredited investor and such permitted
transferee shall be subject to the provisions of this Warrant and the Securities
Purchase Agreement, including, without limitation, this Section 8(a). In
addition, this Warrant may be pledged, and all rights of the Holder under this
Warrant may be assigned, without further consent of the Company, to a bona fide
pledgee, subject to the provisions of this Warrant and the Securities Purchase
Agreement, including, without limitation, this Section 8(a).
Subject to the preceding paragraph, 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 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
<PAGE>
right to purchase such number of shares as shall be designated by the Holder of
at the time of such surrender, up to the number so designated.
(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
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 reasonably 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) No Five Percent Holders. Notwithstanding anything to the
contrary contained herein, the Warrant 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. 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 (the "Exchange Act"), as
amended, and Regulation 13D and G thereunder. For clarification, it is expressly
a term of this Warrant that the limitations contained in this Section shall
apply to each successor Holder. The holders of Common Stock of the Company shall
be third-party beneficiaries of this Section 8(f) and the Company may not waive
this Section 8(f) without the consent of holders of a majority of its Common
Stock.
(g) Redemption of Warrant.
Provided (a) the Company has timely honored all previous exercises of
Warrants, except to the extent Holder has not been damaged by such a failure or
if damaged, has been fully compensated therefor, (b) resale of all of the Common
Stock issuable upon the exercise of this Warrant is covered by an effective
Registration Statement, (c) all such Common Stock can be sold pursuant thereto
at all times during the period from the date which is twenty (20) trading days
prior to the delivery of the Warrant Redemption Notice until the date on which
such Redemption becomes effective (the "Redemption Effective Time"), (d) all
other Liquidity
<PAGE>
Conditions (as defined in Article III of the Certificate of Designation) are
then satisfied and have been satisfied for the twenty (20) immediately preceding
business days, (e) the Company has not failed to remove a legend at the request
of a Purchaser if the Company is required to do so under Section 5.1 of the
Securities Purchase Agreement, except to the extent Holder has not been damaged
by such a failure or if damaged, has been fully compensated therefor, (f) the
Company is not then in violation of any of its material obligations under the
Securities Purchase Agreement, the Registration Rights Agreements, or the terms
of the Preferred Stock (which violations remain uncured), and (g) the Closing
Bid Price of the Common Stock for the ten (10) consecutive trading days
preceding the delivery of the Warrant Redemption Notice is greater than two
hundred percent (200%) of the then-effective Exercise Price, the Company may, by
notice delivered to the Holders (the "Warrant Redemption Notice"), cause each
Warrant outstanding on the date which is ten (10) days after delivery of such
Warrant Redemption Notice to be automatically redeemed on such date for a
redemption price equal to the product of $.01 times the number of shares of
Common Stock into which such Warrant is then exercisable, except as to any
Holder who elects otherwise in the event that a Bankruptcy Event has occurred
and is continuing.
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.
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:
THCG, INC.
650 Madison Avenue, 21st Floor
New York, NY 10022
Telecopy: (212)223-0161
Attention: Adi Raviv
with a copy to:
KRAMER LEVIN NAFTALIS & FRANKEL LLP
919 Third Avenue
New York, NY 10022
Telecopy: (212)715-8000
Attention: Peter S. Kolevzon, Esq.
<PAGE>
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 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.
(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. Notwithstanding anything in this Section
12(c) or elsewhere in this Warrant to the contrary, no Cashless Exercise may be
made at any time at which a registration statement covering the sale by the
Holder of all Warrant Shares to be received upon exercise hereof is effective
and available for use by such Holder for such sale.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
THCG, Inc.
By:
Name:
Title:
<PAGE>
EXHIBIT 1 TO STOCK PURCHASE WARRANT
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 THCG, Inc., 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, pursuant to which the
undersigned is surrendering the right to purchase __________ shares for an
Exercise Price of $__________, with the current Market Price being $_________],
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:
<PAGE>
EXHIBIT 2 TO THE STOCK PURCHASE WARRANT
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.
<PAGE>
