Exhibit 4.1
NEITHER THIS SECURITY NOR THE SECURITIES FOR
WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT
ETELOS
INCORPORATED
|
Warrant Shares:
|
Initial Exercise
Date: January 31, 2008
|
THIS COMMON STOCK PURCHASE WARRANT (the “
Warrant ”) certifies that, for value received,
(the “ Holder ”) is entitled, upon the terms and
subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the
“ Initial Exercise Date ”) and on or prior to
the close of business on the 3 year anniversary of the Initial
Exercise Date (the “ Termination Date ”) but not
thereafter, to subscribe for and purchase from Etelos Incorporated,
a Washington corporation (the “ Company ”), up
to
shares (the “ Warrant Shares ”) of Common Stock.
The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in
Section 2(b).
Section 1 .
Definitions
. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “
Purchase Agreement ”), dated January 31, 2008,
among the Company and the purchasers signatory thereto.
Section 2 .
Exercise
.
a)
Exercise of
Warrant .
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing
to the
1
registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days
of the date said Notice of Exercise is delivered to the Company,
the Company shall have received payment of the aggregate
Exercise Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank.
Notwithstanding anything herein to the contrary, the Holder shall
not be required to physically surrender this Warrant to the Company
until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which
case, the Holder shall surrender this Warrant to the Company for
cancellation within 3 Trading Days of the date the final Notice of
Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such
purchases. The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Day of receipt of such notice.
In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
b)
Exercise
Price . The
exercise price per share of the Common Stock under this Warrant
shall be $0.60 , subject to adjustment hereunder (the
“ Exercise Price ”).
c)
Cashless
Exercise . If
at any time after the earlier of (i) the one year anniversary
of the date of the Purchase Agreement and (ii) the completion
of the then-applicable holding period required by Rule 144, or
any successor provision then in effect, there is no effective
Registration Statement registering, or no current prospectus
available for, the resale of the Warrant Shares by the Holder, then
this Warrant may also be exercised at such time by means of a
“cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the VWAP on the Trading Day
immediately preceding the date of such election;
(B) = the Exercise Price of this
Warrant, as adjusted; and
(X) = the number of Warrant Shares
issuable upon exercise of this Warrant in accordance with the terms
of this Warrant by means of a cash exercise rather than a cashless
exercise.
Notwithstanding anything herein to the
contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this
Section 2(c).
2
d)
Exercise
Limitations .
The Company shall not effect any exercise of this Warrant, and a
Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise as set
forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity
acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the
Holder or any of its Affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this
Section 2(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(d) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of
which portion of this Warrant is exercisable shall be in the sole
discretion of the Holder, and the submission of a Notice of
Exercise shall be deemed to be the Holder’s determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of
which portion of this Warrant is exercisable, in each case subject
to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status
as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this
Section 2(d), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company’s
most recent periodic or annual report, as the case may be,
(y) a more recent public announcement by the Company or
(z) any other notice by the Company or the Company’s
Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
“ Beneficial Ownership Limitation ” shall be
4.99% of the number of shares of the
3
Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable
upon exercise of this Warrant. The Holder, upon not less than 61
days’ prior notice to the Company, may increase or decrease
the Beneficial Ownership Limitation provisions of this
Section 2(d), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this
Section 2(d) shall continue to apply. Any such increase or decrease will not be effective until the 61 st day after such notice is
delivered to the Company. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(d) to correct
this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of this Warrant.
e)
Mechanics of
Exercise .
i.
Delivery of
Certificates Upon Exercise . Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“ DWAC ”) system if the
Company is a participant in such system and there is an effective
Registration Statement permitting the resale of the Warrant Shares
by the Holder, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 3 Trading
Days from the delivery to the Company of the Notice of Exercise
Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“ Warrant
Share Delivery Date ”). This Warrant shall be deemed to
have been exercised on the date the Exercise Price is received by
the Company. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(e)(vi) prior
to the issuance of such shares, have been paid. If the Company
fails for any reason to deliver to the Holder certificates
evidencing the Warrant Shares subject to a Notice of Exercise by
the Warrant Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of Warrant Shares subject to such exercise (based on
the VWAP of the Common Stock on the date of the applicable Notice
of Exercise), $10 per Trading Day (increasing to $20 per Trading
Day on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such Warrant Share Delivery Date
until such certificates are delivered.
4
ii.
Delivery of New
Warrants Upon Exercise . If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii.
Rescission
Rights . If the
Company fails to cause its transfer agent to transmit to the Holder
a certificate or certificates representing the Warrant Shares
pursuant to Section 2(e)(i) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such
exercise.
iv.
Compensation for Buy-In
on Failure to Timely Deliver Certificates Upon Exercise
. In addition to any other
rights available to the Holder, if the Company fails to cause its
transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a
“ Buy-In ”), then the Company shall (1) pay
in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times
(B) the price at which the sell order giving rise to such
purchase obligation was executed, and (2) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its
exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted exercise of
shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
5
v.
No Fractional Shares or
Scrip . No
fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. As to any fraction of a
share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to
such fraction multiplied by the Exercise Price or round up to the
next whole share.
vi.
Charges, Taxes and
Expenses .
Issuance of certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder;
provided , however , that in the event certificates
for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly
executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
vii.
Cl
|
