Note and Warrant Purchase Agreement - Yobon Inc. and MatchNet plc
YOBON INC.
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NOTE AND WARRANT PURCHASE AGREEMENT
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YOBON INC.
NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT (the "AGREEMENT") is made as of
the 19 day of October, 2004 (the "EFFECTIVE DATE") by and among YOBON INC., a
California corporation (the "COMPANY"), and MATCHNET PLC, a United Kingdom
public limited company ("PURCHASER").
RECITALS
To provide the Company with additional resources to conduct its
business, Purchaser is willing to loan funds to the Company, subject to the
conditions specified herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and conditions set forth below, the
Company and Purchaser, intending to be legally bound, hereby agree as follows:
1. AMOUNT AND TERMS OF THE LOAN; ISSUANCE OF WARRANTS
1.1 THE LOAN. Subject to the terms of this Agreement, Purchaser agrees
to lend to the Company at the Closing (as hereinafter defined) $250,000 (the
"LOAN Amount") against the issuance and delivery by the Company of the senior
secured convertible promissory note attached hereto as EXHIBIT A (the "NOTE").
1.2 ISSUANCE OF WARRANTS.
(a) At the Closing (as defined below), the Company shall issue to
Purchaser the warrant attached hereto as Exhibit B (the "WARRANT").
(b) The Company and the Purchaser, as a result of arm's length
bargaining, agree that:
(i) Neither the Purchaser nor any affiliated company has
rendered any services to the Company in connection with this Agreement;
(ii) The Warrant is not being issued as compensation; and
(iii) All tax returns and other information return of each
party relative to this Agreement and the Note and Warrant issued pursuant hereto
shall consistently reflect the matters agreed to in (i) and (ii) above.
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2. THE CLOSING
2.1 CLOSING DATE. The closing of the sale and purchase of the Note and
Warrant (the "CLOSING") shall be on the Effective Date (the "CLOSING DATE").
2.2 DELIVERY. At the Closing: (i) Purchaser shall deliver to the Company
a check or wire transfer funds in the amount of the Loan Amount; and (ii) the
Company shall issue and deliver to Purchaser (a) a Note in favor of Purchaser as
specified in Section 1.1, and (b) a Warrant as specified in Section 1.2.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has the requisite corporate power to own
and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement, to issue the
Note, to issue the Warrant and to carry out and perform its obligations under
the terms of this Agreement and under the terms of the Note and Warrant.
3.3 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its stockholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder, including the issuance and delivery of the
Note and Warrant and the reservation of the equity securities issuable upon
conversion of the Note and exercise of the Warrant has been taken or will be
taken prior to the issuance of such equity securities. This Agreement, the Note
and Warrant, when executed and delivered by the Company, shall constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and, with respect to rights to indemnity,
subject to federal and state securities laws. The equity securities of the
Company, when issued in compliance with the provisions of this Agreement, the
Note or the Warrant will be validly issued, fully paid and nonassessable and
free of any liens or encumbrances and issued in compliance with all applicable
federal and securities laws.
3.4 GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Note, the Warrant, and the equity securities
issuable upon conversion of the Note, exercise of the Warrant or the
consummation of
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any other transaction contemplated hereby shall have been obtained and will be
effective at the Closing.
3.5 COMPLIANCE WITH LAWS. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties, which
violation of which would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its certificate of incorporation or bylaws, or of any
provision of any mortgage, indenture or contract to which it is a party and by
which it is bound or of any judgment, decree, order or writ, other than such
violation(s) that would not have a material adverse effect on the Company. The
execution, delivery and performance of this Agreement, the Note and the Warrant,
and the consummation of the transactions contemplated hereby or thereby will not
result in any such violation or be in conflict with, or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, decree, order or writ or an event that
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal
of any material permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties. Without
limiting the foregoing, the Company has obtained all waivers reasonably
necessary with respect to any preemptive rights, rights of first refusal or
similar rights, including any notice or offering periods provided for as part of
any such rights, in order for the Company to consummate the transactions
contemplated hereunder without any third party obtaining any rights to cause the
Company to offer or issue any securities of the Company as a result of the
consummation of the transactions contemplated hereunder.
3.7 OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, issue,
and sale of the Note and Warrant are and will be exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended
(the "ACT"), and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 PURCHASE FOR OWN ACCOUNT. Purchaser represents that it is acquiring
the Note and the equity securities issuable upon conversion of the Note, the
Warrant and the equity securities issuable upon exercise of the Warrant
(collectively, the "SECURITIES") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
4.2 INFORMATION AND SOPHISTICATION. Without lessening or obviating the
representations and warranties of the Company set forth in Section 3, Purchaser
hereby: (i)
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acknowledges that it has received all the information it has requested from the
Company and it considers necessary or appropriate for deciding whether to
acquire the Securities, (ii) represents that it has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Securities and to obtain any additional
information necessary to verify the accuracy of the information given the
Purchaser and (iii) further represents that it has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risk of this investment.
4.3 ABILITY TO BEAR ECONOMIC RISK. Purchaser acknowledges that
investment in the Securities involves a high degree of risk, and represents that
it is able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.
4.4 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, Purchaser further agrees not to make any
disposition of all or any portion of the Securities except in accordance with
any terms and conditions of the Securities nor unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, Purchaser shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the Act or any applicable state
securities laws, provided that no such opinion shall be required for
dispositions in compliance with Rule 144, except in extraordinary circumstances.
4.5 ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor" as
such term is defined in Rule 501 under the Act.
4.6 FURTHER ASSURANCES. Purchaser agrees and covenants that at any time
and from time to time it will promptly execute and deliver to the Company such
further instruments and documents and take such further action as the Company
may reasonably require in order to carry out the full intent and purpose of this
Agreement and to comply with state or federal securities laws or other
regulatory approvals.
5. MISCELLANEOUS
5.1 BINDING AGREEMENT. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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5.2 NO ASSIGNMENT. Except pursuant to a redomiciling of Purchaser or a
transfer of all or substantially all of Purchaser's business and assets (whether
by merger, sale of assets, sale of stock, or otherwise), Purchaser may not
assign or transfer, by operation of law or otherwise, any of its rights under
this Agreement without the written consent of the Company, which consent shall
not unreasonably be withheld.
5.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California, without giving effect to conflicts of laws principles.
5.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.6 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex, electronic mail or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the Company at 1605 Emory Street, San Jose, California, 95126, and to
Purchaser at the address set forth below the signature page for Purchaser or at
such other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other parties hereto.
5.7 MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Purchaser. Any provision of the
Notes may be amended or waived by the written consent of the Company and
Purchaser.
5.8 EXPENSES. The Company and Purchaser shall each bear its respective
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated herein.
5.9 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to Purchaser, upon any breach or
default of the Company under this Agreement, Note, or Warrant shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. It is further agreed that any waiver, permit, consent
or approval of any kind or character by Purchaser of any breach or default under
this Agreement, or any waiver by Purchaser of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the
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extent specifically set forth in writing and that all remedies, either under
this Agreement, or by law or otherwise afforded to the Purchaser, shall be
cumulative and not alternative.
5.10 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, the Note and
the Warrant constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and no party shall be liable or
bound to any other party in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein.
IN WITNESS WHEREOF, the parties have executed this NOTE AND WARRANT
PURCHASE AGREEMENT as of the date first written above.
COMPANY:
YOBON INC.
By: /s/ Philip Nelson
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Name: Philip Nelson
Title: President
MATCHNET PLC:
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By: /s/ Mark G. Thompson
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Name: Mark G. Thompson
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Title: Chief Financial Officer
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Address: 8383 Wilshire Blvd.
Beverly Hills, CA 90211
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EXHIBITS
Exhibit A: Senior Secured Convertible Promissory Note
Exhibit B: Warrant
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EXHIBIT A
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
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THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
$250,000 OCTOBER 19, 2004
SAN JOSE, CALIFORNIA
For value received, YOBON INC., a California corporation, ("PAYOR"),
promises the following to MATCHNET PLC, a United Kingdom public limited company,
or its permitted assigns ("HOLDER"):
1. This note (the "NOTE") is issued pursuant to the terms of that
certain Note and Warrant Purchase Agreement (the "AGREEMENT") dated of even date
herewith (the "AGREEMENT DATE").
2. In the event that Payor issues and sells equity ("EQUITY") in a round
of equity financing to investors (the "INVESTORS") for an aggregate price of at
least $1,000,000 (excluding the aggregate principal and interest under this
Note) ("TRIGGERING ROUND") prior to the date that is eighteen months following
the Agreement Date (the "INVESTMENT DEADLINE DATE"), this Note will
automatically convert into a number of shares of Equity (on the same terms and
conditions as those given to the Investors in the Triggering Round) in an amount
equal to: (a) all accrued and unpaid interest plus the outstanding and unpaid
principal amount; divided by (b) the price per share paid by the Investors
purchasing the Equity in the Triggering Round.
3. In the event that Payor does not issue and sell shares of Equity to
Investors with an aggregate price of at least $1,000,000 prior to the Investment
Deadline Date, then this Note shall become due and payable in full on the first
business day following the Investment Deadline Date in an amount equal to all
accrued and unpaid interest plus the outstanding and unpaid principal amount.
4. If prior to the Investment Deadline Date, the Company shall sell all
or substantially all of its assets or consolidate or merge with or into another
corporation or other business organization (other than a merger in which either
the Company is the surviving corporation or a majority of the stockholders of
the Company prior to such merger remain as the majority of the stockholders
following such merger), this Note shall become due and payable in full in an
amount equal to all accrued and unpaid interest plus the outstanding and unpaid
principal amount due hereunder.
5. This Note shall accrue interest at 5.75 percent per annum. All
payments of principal and interest made not on conversion of the Note shall be
in lawful money of the United States of America. This Note may be prepaid at any
time in advance of the Investment Deadline Date without prepayment penalty or
charge of any kind.
6. In the event of any default hereunder, Payor shall pay all reasonable
attorneys' fees and court costs incurred by Holder in enforcing and collecting
this Note.
7. As security for payment of this Note, Payor hereby grants Holder a
security interest, equaling the aggregate amount of principal and interest
payable under this Note, in Payor's intellectual
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property assets. Payor will execute any documents at any time and take any other
actions reasonably necessary for Holder to perfect its security interest in such
assets. Payor shall have the right to secure financing, secure investments, sell
its assets or consolidate or merge with or into another corporation or other
business organization, or enter into other financial arrangements in the
ordinary course of business.
8. If there shall be any Event of Default hereunder, at the option and
upon the declaration of the Holder of this Note and upon at least fifteen (15)
days prior written notice to the Payor (which election and notice shall not be
required in the case of an Event of Default under Section 8(c) or 8(d)), this
Note shall accelerate and shall become due and payable in full in an amount
equal to all accrued and unpaid interest plus the outstanding and unpaid
principal amount due hereunder. The occurrence of any one or more of the
following shall constitute an Event of Default:
(a) Payor fails to pay timely any of the outstanding principal
amount due under this Note on the date when and if the same becomes due and
payable;
(b) Payor shall default in its performance of any covenant under
the Agreement that materially jeopardizes Payor's likely repayment of this Note;
(c) Payor files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors;
(d) Any involuntary petition is filed against Payor (unless such
petition is dismissed or discharged within ninety (90) days under any bankruptcy
statute now or hereafter in effect) by a party other than Holder, or a
custodian, receiver, trustee, assignee for the benefit of creditors (or other
similar official) is appointed to take possession, custody or control of any
property of Payor;
(e) An event of default is declared under any other indebtedness
of Payor in an amount greater than $50,000, which default is not cured within
the time allowed pursuant to the terms of such indebtedness.
9. Payor hereby waives demand, notice, presentment, protest and notice
of dishonor.
10. The terms of this Note shall be construed in accordance with the
laws of the State of California, as applied to contracts entered into by
California residents within the State of California, which contracts are to be
performed entirely within the State of California, without giving effect to
conflicts of laws principles.
11. Any term of this Note may be amended or waived with the written
consent of Payor and Holder.
12. Except pursuant to a redomiciling of Holder or a transfer of all or
substantially all of Holder's business and assets (whether by merger, sale of
assets, sale of stock, or otherwise), Holder may not assign or transfer, by
operation of law or otherwise, this Note without the written consent of Payor,
which consent shall not unreasonably be withheld.
YOBON INC.
By: /s/ Philip Nelson
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Name: Philip Nelson
Title: President
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EXHIBIT B
WARRANT
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THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
YOBON INC.
WARRANT TO PURCHASE STOCK
NO. W-1 OCTOBER 19, 2004
VOID AFTER OCTOBER 19, 2007
THIS CERTIFIES THAT, for value received, MATCHNET PLC, a United Kingdom
public limited company with its principal office at 8383 Wilshire Blvd. Beverly
Hills, CA 90211 or permitted assigns (the "Holder"), is entitled to subscribe
for and purchase at the Exercise Price (defined below) from YOBON INC., a
California corporation, with its principal office at 1605 Emory Street, San
Jose, California 95126, (the "Company") up to the number of Issuable Shares
(defined below) of the Equity (defined below) of the Company at any time during
the Exercise Period (defined below), unless sooner terminated as provided below.
This Warrant is being issued pursuant to the terms of the Note and
Warrant Purchase Agreement, dated October 19, 2004 by and among the Company and
the Purchaser (the "Purchase Agreement") and is being issued in conjunction with
a Convertible Promissory Note (as defined in the Purchase Agreement).
1. DEFINITIONS. Capitalized terms used but not defined herein shall have
the meanings set forth in the Purchase Agreement. As used herein, the following
terms shall have the following respective meanings:
(a) "Equity" shall mean the equity securities on the same terms
and conditions as those given to the investors in the Triggering Round (as
defined below).
(b) "Exercise Period" shall mean the period commencing with the
date of the closing of the Triggering Round (as defined below) and ending on the
third anniversary of such date unless sooner terminated as provided below.
(c) "Exercise Price" shall mean the price per share paid by the
investors purchasing the Equity in the Triggering Round (as defined below),
subject to adjustment pursuant to Section 5 below.
(d) "Exercise Shares" shall mean the shares of the Company's
Equity issuable upon exercise of this Warrant, subject to adjustment pursuant to
the terms herein, including but not limited to adjustment pursuant to Section 5
below.
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(e) "Issuable Shares" shall mean that number of shares of Equity
equal to the quotient resulting from dividing (x) the product of 25% and the
principal amount of the Convertible Promissory Note at the time of issuance to
the Holder by (y) the Exercise Price.
(f) "Triggering Round" shall mean when and if the Company issues
and sells Equity in a round of equity financing to investors for an aggregate
price of at least $1,000,000 (excluding the aggregate principal and accrued
interest under the Convertible Promissory Note) prior to the repayment of all
principal and accrued interest under the Convertible Promissory Note.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check,
or (ii) by cancellation of undisputed indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised. In
the event that this Warrant is being exercised for less than all of the
then-current number of Exercise Shares purchasable hereunder, the Company shall,
concurrently with the issuance by the Company of the number of Warrant Shares
for which this Warrant is then being exercised, issue a new Warrant exercisable
for the remaining number of Warrant Shares purchasable hereunder.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1 NET EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Equity is
greater than the Exercise Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise in
which event the Company shall issue to the Holder a number of shares of Equity
computed using the following formula:
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X = Y (A-B)
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A
Where X = the number of shares of Equity to be issued to
the Holder
Y = the number of shares of Equity purchasable under
the Warrant or, if only a portion of the Warrant
is being exercised, the portion of the Warrant
being canceled (at the date of such calculation)
A = the fair market value of one share of the
Company's Equity (at the date of such
calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one
share of Equity shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event that this Warrant is exercised
pursuant to this Section 2.1 in connection with the Company's initial public
offering of its Equity, the fair market value per share shall be the per share
offering price to the public of the Company's initial public offering.
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Equity to provide for the exercise of the rights represented by
this Warrant. If at any time during the Exercise Period the number of authorized
but unissued shares of Equity shall not be sufficient to permit exercise of this
Warrant, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Equity to such number of shares as shall be sufficient for such purposes.
3.2 NO IMPAIRMENT. Except and to the extent as waived or
consented to by the Holder, the Company will not, by amendment of its
Certificate of Incorporation 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 hereunder by the Company, 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 action as may be necessary or appropriate
in order to protect the exercise rights of the Holder against impairment.
3.3 NOTICES OF RECORD DATE. In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the Holder,
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at least ten (10) days prior to the date specified herein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution.
4. REPRESENTATIONS OF HOLDER.
4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant and the Exercise Shares
solely for its account for investment and not with a view to or for sale or
distribution of said Warrant or Exercise Shares or any part thereof. The Holder
also represents that the entire legal and beneficial interests of the Warrant
and Exercise Shares the Holder is acquiring is being acquired for, and will be
held for, its account only.
4.2 SECURITIES ARE NOT REGISTERED.
(a) The Holder understands that the Warrant and the
Exercise Shares have not been registered under the Securities Act of 1933, as
amended (the "Act") on the basis that no distribution or public offering of the
stock of the Company is to be effected. The Holder realizes that the basis for
the exemption may not be present if, notwithstanding its representations, the
Holder has a present intention of acquiring the securities for a fixed or
determinable period in the future, selling (in connection with a distribution or
otherwise), granting any participation in, or otherwise distributing the
securities. The Holder has no such present intention.
(b) The Holder recognizes that the Warrant and the
Exercise Shares must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The Holder recognizes that the Company has no obligation to register the Warrant
or the Exercise Shares of the Company, or to comply with any exemption from such
registration.
(c) The Holder is aware that neither the Warrant nor the
Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met, including, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale following the required holding period
under Rule 144 and the number of shares being sold during any three month period
not exceeding specified limitations. Holder is aware that the conditions for
resale set forth in Rule 144 have not been satisfied and that the Company
presently has no plans to satisfy these conditions in the foreseeable future.
4.3 DISPOSITION OF WARRANT AND EXERCISE SHARES.
(a) The Holder further agrees not to make any disposition
of all or any part of the Warrant or Exercise Shares in any event, except as
permitted by the terms and conditions applicable to the Equity and Section 10
below, and unless and until:
(i) The Company shall have received a letter secured
by the Holder from the Securities and Exchange Commission stating that no action
will be recommended to the Commission with respect to the proposed disposition;
<PAGE>
(ii) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and if
reasonably requested by the Company, the Holder shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, for the
Holder to the effect that such disposition will not require registration of such
Warrant or Exercise Shares under the Act or any applicable state securities
laws.
(b) The Holder understands and agrees that all
certificates evidencing the shares to be issued to the Holder may bear the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4.4 ACCREDITED INVESTOR STATUS. The Holder is an "accredited
investor" as defined in Regulation D under the Act.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF EXERCISE SHARES. In the
event of changes in the outstanding Equity of the Company by reason of stock
dividends, split-ups, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Exercise Price shall be correspondingly adjusted to give the Holder of the
Warrant, on exercise for the same aggregate Exercise Price, the total number,
class, and kind of shares as the Holder would have owned had the Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment; provided, however, that such
adjustment shall not be made with respect to, and this Warrant shall terminate
if not exercised prior to, the events set forth in Section 7 below. The form of
this Warrant need not be changed because of any adjustment in the number of
Exercise Shares subject to this Warrant.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the exercise would
result in the issuance of a fractional share, the Company shall, in lieu of
issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.
<PAGE>
7. EARLY TERMINATION.
7.1 This Warrant shall terminate in the event that a Triggering
Round does not timely occur.
7.2 In the event of, at any time during the Exercise Period, an
initial public offering of securities of the Company registered under the Act,
or any capital reorganization, or any reclassification of the capital stock of
the Company (other than a change in par value or from par value to no par value
or no par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
Company with or into another corporation (other than a merger solely to effect a
reincorporation of the Company into another state), or the sale or other
disposition of all or substantially all the properties and assets of the Company
in its entirety to any other person, the Company shall provide to the Holder
twenty (20) days advance written notice of such public offering, reorganization,
reclassification, consolidation, merger or sale or other disposition of the
Company's assets, and this Warrant shall terminate unless exercised prior to the
date such public offering is closed or the occurrence of such reorganization,
reclassification, consolidation, merger or sale or other disposition of the
Company's assets.
8. MARKET STAND-OFF AGREEMENT. Holder shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any Equity (or other securities) of the Company held by Holder, for a period of
time specified by the managing underwriter(s) (not to exceed one hundred eighty
(180) days) following the effective date of a registration statement of the
Company filed under the Act. Holder agrees to execute and deliver such other
agreements as may be reasonably requested by the Company and/or the managing
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to such Equity (or
other securities) until the end of such period. The underwriters of the
Company's stock are intended third party beneficiaries of this Section 8 and
shall have the right, power and authority to enforce the provisions hereof as
though they were a party hereto.
9. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company.
10. TRANSFER OF WARRANT. Subject to applicable laws and the restriction
on transfer set forth on the first page and in Section 4 of this Warrant, except
pursuant to a redomiciling of Holder or a transfer of all or substantially all
of Holder's business and assets (whether by merger, sale of assets, sale of
stock, or otherwise), this Warrant and all rights hereunder are not transferable
without the written consent of the Company, which consent shall not unreasonably
be withheld; and, in the event of any permitted transfer, by the Holder in
person or by duly authorized attorney, upon delivery of this Warrant and the
form of assignment attached hereto to any permitted transferee designated by
Holder. The transferee shall sign an investment letter in form and substance
satisfactory to the Company.
11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as
<PAGE>
it may reasonably impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
12. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
and to Holder at the address on the first page hereof or at such other address
as the Company or Holder may designate by ten (10) days advance written notice
to the other parties hereto.
13. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.
14. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by and construed under the laws of the
State of California as applied to agreements among California residents, made
and to be performed entirely within the State of California without giving
effect to conflicts of laws principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of October 19, 2004.
YOBON INC.
By: /s/ Philip Nelson
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE>
NOTICE OF EXERCISE
TO: [COMPANY NAME]
(1) [ ] The undersigned hereby elects to purchase ________ shares of the
Equity of YOBON INC. (the "Company") pursuant to the terms of the attached
Warrant, and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares of the
Equity of the Company pursuant to the terms of the net exercise provisions set
forth in Section 2.1 of the attached Warrant, and shall tender payment of all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Equity in the name of the undersigned or in such other name as is specified
below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Equity
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares; (ii) the undersigned is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that the shares of Equity issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; (v) the undersigned is aware that
the aforesaid shares of Equity may not be sold pursuant to Rule 144 adopted
under the Securities Act unless certain conditions are met and until the
undersigned has held the shares for the number of years prescribed by Rule 144,
that among the conditions for use of the Rule is the availability of current
information to the public about the Company and the Company has not made such
information available and has no present plans to do so; and (vi) the
undersigned agrees not to make any disposition of all or any part of the
aforesaid shares of Equity unless and until there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with said registration
statement, or the undersigned has provided the Company with an opinion of
counsel satisfactory to the Company, stating that such registration is not
required.
B-1
<PAGE>
------------------------------------- ----------------------------------------
(Date) (Signature)
----------------------------------------
(Print name)
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
--------------------------------------------------------------------------
(Please Print)
Address:
--------------------------------------------------------------------------
(Please Print)
Dated: __________, 20__
Holder's
Signature:
--------------------------------------
Holder's
Address:
--------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.